Ahead of the Bell: Soaring Altria downgraded
NEW YORK—Altria Group was downgraded by Stifel, Nicolaus & Co. Wednesday, a day after the cigarette maker hit a 52-week high of $29.25.
Analyst Christopher Growe said fundamentals at the company are solid and that 2012 looks good as well, with expectations for limited state excise tax increases and strong cash flow generation.
However, "the recent strength in the share price has pushed its valuation up to a level that we believe allows for less aggressive upside," Growe said, lowering Altria to "Hold" from "Buy."
Shares diiped 12 cents to $28.87 in premarket trading.
Stifel, Nicolaus remains confident in its earnings growth outlook for the next two years, Growe said, particularly because of a new $400 million, two-year cost-cutting program in the company's cigarette business, as well as a $1 billion share repurchase program that will begin in 2012.
"Investors have been keyed in on the company's performance in cigarettes from a market share standpoint and particularly for its lead brand, Marlboro," said Growe. "Although market share is important, we believe Altria takes a more prudent stance and manages its business not for quarterly market share growth, but for growth in profitability and margin for its cigarette division."
Altria is based in Richmond, Va.