Altria (MO) has rebounded slightly this week, after an appeals court on Friday temporarily blocked an FDA ban on products sold by Juul, the vaping startup that Altria partly owns. So isMO stock a buy now?
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Juul on Monday filed a motion to keep the FDA's ban on hold while it appeals the agency's decision. The FDA last week ordered Juul to stop selling its products in the U.S., saying that the e-cigarette maker did not provide "sufficient evidence" to gauge its products' health risks.
News of the FDA's decision was first reported by the Wall Street Journal. MO stock fell 9% on the report. That report came shortly after the FDA said it planned to propose maximum nicotine limits in cigarettes — one of the agency's recent efforts to curb addiction and smoking among younger users.
Altria, best known for selling Marlboros in the U.S., in 2018 said it would take a 35% stake in Juul — part of the tobacco giant's efforts to become less of a traditional-cigarette company. But lawsuits alleging misleading health claims and efforts to target younger consumers have piled up against the e-cigarette maker.
Against that backdrop, the FDA is increasingly asking e-cigarette manufacturers to justify their existence. The FDA is trying to determine whether vaping products from hundreds of companies can still be sold, after asking manufacturers of those products to submit applications by September 2020 that demonstrated their products weren't as unhealthy as traditional cigarettes.
The agency, initially, had held off on making a decision on products made by Juul. And it had given the green light for products made by some of Juul's competitors.
Altria said it was "disappointed" with the FDA's decision last week. And said it believed "e-vapor can play an important role in harm reduction for adult smokers."
"Having received the emergency temporary stay, we are now seeking the ability to continuously offer our products to adult smokers throughout our appeal with the court and science- and evidence-based engagement with our regulator," Joe Murillo, Juul's chief regulatory officer, said in a statement sent Tuesday.
Altria in February got some signs of possible relief over its investment in e-cigarette maker Juul, after a judge, in an initial decision, dismissed the Federal Trade Commission's antitrust charges against the tobacco giant's investment in the vaping startup.
Morgan Stanley Downgrades MO Stock
The regulatory drama descends as inflation concerns lead to bigger recession concerns. According to Seeking Alpha, Morgan Stanley recently cut its rating on Altria to underweight, from equal weight, saying higher gas prices and more anxious customers could constrain cigarette volumes.
Altria on April 28 reported first-quarter earnings per share that beat expectations. But revenue missed. During its conference call, management said that the spike in omicron cases earlier this year briefly interrupted customers' purchasing routines. But it said rising prices — including for gas, which has been driven higher by Russia's war in Ukraine — were offset by rising wages and higher tax refunds.
"For some occupations, wage growth outpaced inflation, including occupations that over-index toward tobacco consumers," CEO Billy Gifford said. Those jobs, he said, included work in production and transportation.
Altria expects full-year earnings-per-share of $4.79 to $4.93 for the year. Wall Street expects full-year earnings per share of $4.86. With the market wobbling, Altria has also paid a dividend for a long time, including $6.4 billion last year.
The results from Altria arrived the same day that the FDA proposed rules prohibiting menthol cigarettes and flavored cigars. The rules, the agency said, would prevent children from picking up smoking and help adults quit.
President Biden has also signed a bill that allows the FDA to regulate synthetic nicotine, used in some vaping devices.
MO Stock, IQOS, Juul
Altria's other ventures beyond traditional cigarettes have also drawn regulators' attention.
The International Trade Commission ordered Altria and Philip Morris International (PM), which Altria spun off in 2008, to stop importing and selling the IQOS heating device, after the agency found the devices infringed on patents held by Reynolds American, owned by British American Tobacco (BAT).
Elsewhere, Altria has invested in Canadian cannabis company Cronos Group (CRON). Analysts have waited for more to come from that investment, as competition remains stiff in Canada's legal marijuana market.
Altria has also faced questions about cigarette demand as people become more health conscious, even though customers clung to their smoking habits in 2020 amid the stress of the coronavirus pandemic.
MO Stock Fundamental Analysis
Analysts expect Altria's earnings to grow 5% this year and 6% next year, according to FactSet.
Top stocks usually have solid underlying earnings growth. But overall, MO stock falls far short of theCAN SLIM benchmark for 25% growth in earnings and revenue.
Sales growth for Altria has been choppy, bouncing between single-digit percentage gains and declines over recent years.
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MO Stock Technical Analysis
MO stock is currently trading at around 43. Shares have an 79 Composite Rating. The stock's EPS Rating, which measures earnings growth, is 76.
MO stock is still not close to the highs it reached in mid-2017.The stock'srelative strength line has fallen recently.
When a stock's relative strength line goes lower, that means it's falling behind overall compared to the S&P 500.
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So Is Altria Stock A Buy?
MO stock is technically not a buy right now.
Earnings growth for MO stock might tick higher this year. However, revenue has bounced between anemic growth and modest declines.
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Follow Bill Peters on Twitter at @IBD_BPeters.
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