Altria Approaches Key Resistance After Q4 Breakout

Opinions Are Still Mixed Following JUUL Investment

Altria Group, Inc. (MO) shares rose more than 1% on Thursday morning after the company reported fourth quarter financial results. Revenue rose 1.7% to $4.79 billion, missing consensus estimates by $20 million, and non-GAAP earnings per share were in line at 95 cents.

The company expects full-year domestic cigarette industry volume to fall at a 3.5% to 5% pace, but full-year earnings per share guidance of $4.15 to $4.27 was in line with the $4.24 analyst consensus. In addition, the company expects to maintain a dividend payout ratio target of approximately 80% of its adjusted diluted earnings per share. 

Analysts have been divided on the stock following its acquisition of a 35% stake in JUUL. Morgan Stanley downgraded Altria stock to Underweight with a price target of $45.00 per share, saying that the JUUL investment came at an expensive valuation considering the FDA's flavor restrictions at retail and the potential for more restrictions to come. However, Wells Fargo analysts called the sell-off "way overdone" and expect earnings per share growth to accelerate to a roughly 10% compound annual growth rate (CAGR) by 2025.

Technical chart showing the share price performance of Altria Group, Inc. (MO)

From a technical standpoint, the stock broke out from a downward channel earlier this month toward the pivot point and 50-day moving average at around $50.00. The relative strength index (RSI) recovered to neutral levels of 52.10, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal more upside ahead. These indicators suggest that the stock has more room to run, although strong resistance levels could lead to consolidation.

Traders should watch for some consolidation below the pivot point and 50-day moving average levels of around $50.00 over the coming sessions. A breakout from these levels could lead to a move toward R1 resistance and the 200-day moving average near $55.00. If the stock breaks below trendline support, it could move to retest S1 support at $45.48 or lower trendline and S2 support at $41.57, although that scenario appears less likely to occur.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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