Can Altria Keep Raking In Profits in 2013?

As 2013 begins, now's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.

Today, I'll look at Altria (NYSE: MO  ) . The cigarette giant kept moving higher in 2012 despite seeing some erosion in its underlying business fundamentals. With the tide continuing to turn against tobacco, can Altria keep up the pace? Read on for more about Altria's prospects for 2013.

Stats on Altria

Average Stock Target Price

$36.10

Full-Year 2012 EPS Estimate

$2.21

Full-Year 2013 EPS Estimate

$2.38

Full-Year 2012 Sales Growth Estimate

4.7%

Full-Year 2013 Sales Growth Estimate

1.1%

Forward P/E

13.7

Source: Yahoo! Finance.

Will Altria keep smoking in 2013?
Analysts expect Altria to keep its slow but steady upward pace this year. With earnings expected to rise about 8%, the target stock price is about 10% higher than its current price, even with expectations that sales growth will slow down in 2013.

It's easy to focus on Altria's past success and argue that it's destined to succeed in the future. Since the 1950s, the company has posted average returns of about 20%, crushing every other stock in the market.

But Altria faces a threat that it hasn't had to deal with throughout most of its history. Its spinoff of Philip Morris International (NYSE: PM  ) has boxed Altria in, essentially trapping it in the hostile U.S. regulatory environment without being able to turn to international markets for growth opportunities. Moreover, even as earnings growth has stagnated, huge demand for the big dividends that the stock pays has driven valuations higher throughout the past year.

Moreover, domestic competitors are finally standing up to Altria. Even though Reynolds American (NYSE: RAI  ) has joined Altria in cutting jobs, Lorillard (NYSE: LO  ) has seen growth in both its high-end Newport brand as well as its lower-cost discount brands. As money has remained tight, even discount specialist Vector Group (NYSE: VGR  ) has seen growth in popularity, and with payroll tax hikes in 2013, that trend could easily continue.

For Altria to reignite growth, it needs to overcome negative advertising, regulatory threats, and legal restrictions to reverse the tide of anti-smoking sentiment. That's a tall order, but Altria has overcome similar challenges several times in its past.

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