Is Altria Stock A Value Play Or A Yield Trap At $60?

Core Insights - Altria's stock dropped 5% following a Q4 earnings miss, with revenue of $5.08 billion exceeding expectations but adjusted EPS of $1.30 falling short of the $1.32 consensus, leading to a sell-off as investors prioritize earnings quality over revenue surprises in the tobacco sector [2] Financial Performance - The GAAP operating margin fell significantly from 56.4% in Q4 2024 to 30% in Q4 2025, primarily due to a $1.3 billion non-cash impairment charge related to its e-vapor business, while adjusted operating margin was 60.4%, down 80 basis points year-over-year [5] - Altria reported trailing twelve-month revenue of $20.91 billion, essentially unchanged from three years prior, with an annualized volume growth of only 2.8% over five years, indicating a cash generation story rather than a growth narrative [6] 2026 Guidance - The full-year adjusted EPS guidance for 2026 is set at $5.56-$5.72, reflecting only a 2.5-5.5% growth from 2025's $5.42, which barely matches inflation rates, with anticipated growth weighted towards the second half of the year [7] Valuation and Shareholder Returns - Altria's stock is priced around $60 per share, trading at 11 times trailing earnings with a 7.2% dividend yield, having returned $8 billion to shareholders in 2025 through dividends and share buybacks [8][9] - The current 11x multiple is significantly lower than the last five-year average of 16x, indicating a potentially appealing valuation on paper [9] Competitive Position - Altria holds the largest U.S. cigarette market share via Marlboro but faces structural challenges, with U.S. cigarette volumes dropping 6% annually from 2019 to 2024, outpacing a global decline of 1% [10] - The company enjoys pricing power in a mature market, yet volume erosion is accelerating, and while the on! pouch market is expanding, it is starting from a small base and faces intense competition [10] Investment Proposition - The investment proposition for Altria involves owning a declining business that offers over 7% annually while it shrinks, with minimal earnings growth and a slow transition to smoke-free products [11] - The value proposition lies in collecting a substantial dividend while hoping for future growth from smoke-free products, appealing to income investors who can tolerate gradual decline [12]