Now that Altria (MO) has announced the spin details, let’s look at some numbers.
If we assume a multiple of 15 times earnings, a fair one considering MO ought to grow at 9% to 11% and 20 times earnings for PM (PMI) as it ought to grow 12% to 14% and be free of litigation.
That gives us an initial share price of $22.50 for MO and $57.40 for PM. These will adjust slightly but the exercise is to give more details to what is being announced. Currently the combined entities trade at $76 and change so the above numbers are fairly accurate.
The dividend yield at those price levels will be 5.1% for MO and 3.2% for PM
As of 9/30 there were 2.1 billion shares outstanding giving MO a new market cap of approx. $47 billion and PM of $120 billion. The share repurchases will equate to roughly 16% of MO’s outstanding shares and 11% of PM’s.
The earnings call at 1pm today ought to be interesting…
Disclosure (“none” means no position): Long MO and will be long PM
3 replies on “More On Altria”
Todd,
In your opinion would investors be better served if they sold MO and held PM, after the spin-off?
nick,
honestly, I am going to hold both. I think the heads at MO have something up their sleeve. the buybacks alone are going to boost eps big time through 2009 and i can see this thing yielding 4% and growing the dividend 10%+ long term….
after the split, if i had to buy one, i think i may lean towards pm but it is tough to say until after the march investors day
i think we get more clarification then
Thank you for your thoughts.