Shares of cigarette manufacturer Altria Group Inc. (MO) hit a new 52-week high of $44.50 on Sep 16 on rumors of Anheuser-Busch InBev SA/NV (BUD), aka AB InBev, looking for finances to buy the brewing company SABMiller plc (SBMRY), in which Altria holds a majority stake.
Growth Drivers
Altria is the largest shareholder of SABMiller, owning a 27% stake. For a decade now, there have been rumors that SABMiller could be acquired by its peer AB InBev for $122 billion. Anti-trust issues, however, have kept the deal from materializing. However, last week media reports stated that AB InBev is in talks with banks to finance the deal and this has sparked speculation about the deal.
Meanwhile another round of rumors suggests a possible merger between SABMiller and U.K’s leading brewer Diageo plc (DEO). The merger if materializes would give SABMiller access to Diageo's prized Guinness beer business, as well as numerous other leading brands across Africa. Investors are particularly interested as both the outcomes will be beneficial to Altria.
Guidance Affirmed
In its recently held Back-to-School conference call Altria reaffirmed the fiscal 2014 earnings outlook provided during the second-quarter conference call. The company expects earnings in the range of $2.54 to $2.59, up 6% to 9% from $2.38 in 2013.
Altria, which currently carries a Zacks Rank #3 (Hold) expects 2014 earnings to benefit from lower interest expense, lower effective tax rate and lower share count due to the current share buyback program.
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