Gimme Credit Affirms Altria’s 2033 Notes at Outperform Following Share Buybacks, According to

Gimme Credit Affirms Altria’s 2033 Notes at Outperform Following Share Buybacks, According to

© Reuters Gimme Credit Holds Altria (MO) 2033 Bonds at Outperform Amid Share Buybacks

On Tuesday, corporate bond research firm Gimme Credit reiterated its “Outperform” rating on Altria Group (NYSE:), specifically for the company’s 2033 notes at T+144. Despite a difficult economic environment and a steady decline in cigarette volume, Altria managed to maintain stable financial performance through strategic maneuvers, the company explained.

In January, Altria reported its fourth-quarter results, which showed modest adjusted earnings per share (EPS) growth of 1% to 4% for 2024, below its five-year target of average compound annual growth at a figure. rate. The company’s adjusted EPS growth for 2023 was 2.3%, largely supported by a reduction in the number of shares resulting from share repurchases. Adjusted net income for the year increased by less than 1%.

Additionally, Gimme Credit explained that last week, Altria announced the sale of $200 million of Anheuser-Bush InBev (ABI) stock to ABI and plans to sell an additional 35 to 40 million shares through ‘a secondary offering, hoping to raise around $2.4. billion before the options of the subscribers. After the sale, Altria will retain an approximately 8% stake in ABI, up from 10%. The company intends to use proceeds from the sale to “significantly enhance” shareholder returns, adding $2.4 billion to its new $1 billion share repurchase program and launching a $2.4 billion accelerated share repurchase (ASR) program.

Altria also expects a non-cash gain of $200 million from the ABI stock transaction, although it has written down its holdings by approximately $8.4 billion in 2021 and 2022, Gimme Credit notes. The company expects annual dividend savings from the buyout to be approximately $170 million, with only approximately $4 million in ABI dividends lost, resulting in a positive cash flow position. The company raised its adjusted EPS guidance for the year to reflect 3% growth at the midpoint, in light of the ASR.

After the offering, Altria’s remaining ABI shares are valued between $9.3 billion and $9.5 billion, providing the company with “significant financial flexibility” in addition to its free cash flow generation of more than 2 billion dollars. Despite economic pressure on consumers, Altria’s premium Marlboro brand has maintained its market share.

Overall, Gimme Credit estimates that Altria continues to generate strong cash flow, $9.3 billion in 2023, with “fairly modest” capital expenditures.

“Net debt remained unchanged despite the $2.8 billion acquisition of NJOY, and liquidity stood at $3.7 billion before the recent retirement of $1 billion in debt maturities. The new ten-year bond issued in October has tightened but still represents good relative value,” they added.

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