Altria Group (MO) and British American Tobacco (BTI) Financial Review

Altria Group (NYSE: MO) and British American Tobacco (NYSE:BTI) are both large-cap consumer staples companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, dividends, risk, analyst recommendations, institutional ownership, valuation and earnings.

Institutional and Insider Ownership

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62.6% of Altria Group shares are held by institutional investors. Comparatively, 8.8% of British American Tobacco shares are held by institutional investors. 0.1% of Altria Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Altria Group pays an annual dividend of $2.80 per share and has a dividend yield of 4.4%. British American Tobacco pays an annual dividend of $2.02 per share and has a dividend yield of 3.4%. Altria Group pays out 82.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. British American Tobacco pays out 54.9% of its earnings in the form of a dividend. Altria Group has raised its dividend for 9 consecutive years. Altria Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Altria Group and British American Tobacco’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Altria Group 39.97% 50.01% 14.74%
British American Tobacco N/A N/A N/A

Earnings and Valuation

This table compares Altria Group and British American Tobacco’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Altria Group $25.58 billion 4.74 $10.22 billion $3.38 18.89
British American Tobacco $26.15 billion 4.91 $48.37 billion $3.68 16.38

British American Tobacco has higher revenue and earnings than Altria Group. British American Tobacco is trading at a lower price-to-earnings ratio than Altria Group, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Altria Group has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500. Comparatively, British American Tobacco has a beta of 1.06, suggesting that its stock price is 6% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Altria Group and British American Tobacco, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Altria Group 0 1 10 0 2.91
British American Tobacco 0 1 9 0 2.90

Altria Group currently has a consensus price target of $75.20, suggesting a potential upside of 17.78%. British American Tobacco has a consensus price target of $78.50, suggesting a potential upside of 30.25%. Given British American Tobacco’s higher probable upside, analysts clearly believe British American Tobacco is more favorable than Altria Group.

Summary

Altria Group beats British American Tobacco on 10 of the 17 factors compared between the two stocks.

About Altria Group

Altria Group, Inc. is a holding company. The Company’s segments include smokeable products, smokeless products and wine. The Company’s subsidiaries include Philip Morris USA Inc. (PM USA), which is engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co. (Middleton), which is engaged in the manufacture and sale of machine-made cigars and pipe tobacco, and UST LLC (UST), which, through its subsidiaries, including U.S. Smokeless Tobacco Company LLC (USSTC) and Ste. Michelle Wine Estates Ltd. (Ste. Michelle), is engaged in the manufacture and sale of smokeless tobacco products and wine. Its other operating companies include Nu Mark LLC (Nu Mark), a subsidiary that is engaged in the manufacture and sale of tobacco products, and Philip Morris Capital Corporation (PMCC), a subsidiary that maintains a portfolio of finance assets. Other subsidiaries include Altria Group Distribution Company and Altria Client Services LLC.

About British American Tobacco

British American Tobacco p.l.c. is a tobacco and next generation products company. The Company’s tobacco product range includes cigarettes, fine cut (roll-your-own and make-your-own tobacco) and Swedish-style snus. Its segments include Asia-Pacific, Americas, Western Europe, and Eastern Europe, Middle East and Africa (EEMEA). The Asia-Pacific segment includes its operations in various countries, including Australia, Pakistan, Malaysia, Vietnam, Japan, South Korea, Indonesia, New Zealand and Bangladesh. The Americas segment includes its operations in various countries, including Brazil, Mexico, Canada, Colombia, Argentina, Chile and Venezuela. The Western Europe segment includes its operations in various countries, including Germany, Denmark, Switzerland, Belgium, France, the United Kingdom, Romania, Spain, Italy, Poland and Croatia/Balkans. The EEMEA segment includes its operations in various countries, including Russia, Ukraine, South Africa, Turkey, Egypt, Nigeria and Algeria.

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