NEW YORK (TheStreet) -- Shares of tobacco company Altria Group (MO) rose in morning trading Monday to hit a 52-week high of $44.50 amid increasing conversation about consolidation among beer companies.
Altria holds a stake in British brewing company SABMiller (SAB) , which has targeted Heineken in the latest beer consolidation talks, though Heineken rejected the company's offer. Anheuser-Busch (BUD) is also reportedly seeking financing in an attempt to take over SABMiller in what could be a $122 billion deal.
Altria's stake in SABMiller is nearly 430 million shares, or 27%, and is worth approximately 30% of the tobacco company's market cap.
Separately, TheStreet Ratings team rates ALTRIA GROUP INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate ALTRIA GROUP INC (MO) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, growth in earnings per share, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MO's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for ALTRIA GROUP INC is rather high; currently it is at 57.93%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.60% is above that of the industry average.
- ALTRIA GROUP INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ALTRIA GROUP INC increased its bottom line by earning $2.26 versus $2.06 in the prior year. This year, the market expects an improvement in earnings ($2.57 versus $2.26).
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Tobacco industry and the overall market, ALTRIA GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: MO Ratings Report
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