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Investing.com -- UBS upgraded Altria Group (NYSE:MO) to Neutral from Sell, saying stepped-up enforcement against illicit e-cigarette imports, particularly from China, could ease pressure on cigarette volumes and stabilize earnings growth.
The brokerage lifted its price target to $59 from $47 and said U.S. customs crackdowns are disrupting shipments of unauthorized vapor products, including a roughly 40% drop in Chinese vape exports to the U.S. in May.
One of the biggest brands, Geek Bar, has reportedly halted production.
Illicit vapes have eroded cigarette volumes for years, but UBS said the shift in enforcement could improve industry trends by about 100 basis points, trimming the annual cigarette volume decline to -8% from a previous estimate of 9% or worse.
UBS now believes Altria’s earnings will hold steady through 2026, driven by better volume performance, cost savings of over $600 million, and targeted price investment in its discount Basic brand. It raised its 2026 and 2027 EPS forecasts by 3.5% and 5.8%, respectively.
Even so, the brokerage flagged ongoing uncertainty around Altria’s smoke-free strategy.
Its NJOY e-cigarette unit faces regulatory setbacks, and recent volumes of its on! nicotine pouches declined sequentially.
Ahead of second-quarter results due July 30, UBS expects Altria to report a 10.5% drop in cigarette shipments and group earnings per share of $1.41, slightly above the $1.38 consensus, helped by lower legal fees and a smaller share count.
Altria trades at 10.5x estimated 2026 earnings, a 15% discount to peers, though narrower than the previous 30% gap. UBS said it prefers British American Tobacco (NYSE:BTI), which trades at 9.6x and has a clearer growth path.