Major Investors Exit Altria Despite Compelling Valuation

A significant divergence is emerging for Altria Group, the company behind Marlboro cigarettes. While corporate leadership commits billions to share repurchases and the stock trades near historic valuation lows, institutional heavyweights are quietly reducing their exposure. This creates a puzzling scenario: the tobacco giant appears fundamentally inexpensive, yet professional investors are heading for the exits, raising questions about potential unseen risks.

Aggressive Buybacks Meet Tepid Investor Sentiment

The company’s latest quarterly report presented a mixed picture. Although earnings per share came in at $1.45, slightly surpassing estimates of $1.44, the top line disappointed. Revenue of $5.25 billion represented a 3.0% year-over-year decline and fell short of the $5.31 billion consensus forecast.

In response, management launched an aggressive capital return initiative, authorizing a $2.0 billion share buyback program. This strategic move is designed to bolster the share price and signals the executive team’s confidence in the firm’s enduring profitability. However, this substantial financial commitment has so far failed to convince major shareholders to maintain their positions.

Institutional Selling Gains Momentum

Fresh data revealed this week that Franklin Resources Inc. has substantially pared down its stake in Altria. The investment firm slashed its position by 9.0%, disposing of 257,417 shares and reducing its total holding to approximately 2.6 million shares.

Should investors sell immediately? Or is it worth buying Altria?

Franklin Resources is not alone in its retreat. Longfellow Investment Management has also been divesting its Altria holdings, contributing to the prevailing selling pressure. This institutional skepticism is particularly notable given that the stock has already declined by 10% over the past month. Such a pullback would typically attract value-oriented buyers, yet major asset managers currently appear more focused on risk mitigation than on perceived opportunities within the tobacco sector.

The Valuation Conundrum Deepens

From a fundamental perspective, Altria’s metrics suggest substantial undervaluation. The stock currently trades at a Price-to-Earnings (P/E) ratio of 11.0, significantly below the industry average of 14.3. Analysis from Simply Wall St. presents an even starker picture: their assessment, based on discounted cash flow models, indicates the shares may be trading 43.9% below their fair value.

This creates a remarkable disconnect between traditional valuation measures and market sentiment. The market appears to be pricing in substantial regulatory headwinds or structural challenges within the industry, seemingly overlooking the company’s continued robust cash flow generation. This very tension between price and perceived value is defining the current trading dynamic for Altria shares. The critical question remains whether a $2 billion buyback program can stem the growing institutional exodus.