By Sam Boughedda
Altria Group (NYSE:MO) was reiterated with a Buy rating and $49 per share price target by BofA analysts on Thursday.
The analysts explained that effective January 22, Altria's Philip Morris (NYSE:PM) USA division has announced a list price increase of 15c/per pack on Marlboro, its first increase of 2023, and follows a price boost of +15c in October 2022, July 2022, April 2022, and December 2021.
"Compared to year ago prices, Marlboro's list price increased by ~10%, driven by mgmt's desire to maintain profitability goals. Further, per pack prices for Benson & Hedges, Merit, Nat's, Parliament, and Virginia Slims have been lifted by 20c per pack in MO's latest round of price increases," the analysts said.
They added that Altria's price hikes are less aggressive than British American Tobacco (NYSE:BTI)'s recent U.S. cigarette pricing moves.
"While nicotine is an addictive product, we anticipate these more frequent pricing actions at a time of elevated inflation to drive combustible tobacco users to lower priced nicotine alternatives (oral, vapor and deep discount cigarettes) despite continued employment and wage growth for lower income consumers," wrote the analysts. "We would also note that price gap (Marlboro vs. the lowest effective brand) has widened to nearly 40% (39.8%) as of 3Q22, a level not seen since 2009."
The analysts went on to state that Altria has a "long history of adapting to changes in the U.S. nicotine landscape," and they expect this to continue. The company's shares have climbed 1% in Thursday's session.