- Several firms are commenting on Altria Group (NYSE:MO) after the co moved back the date of its 3Q2006 earnings release one day to October 25 with a conference call scheduled for 2:00 p.m. EST. The new earnings release date falls on the same day as a planned informal board meeting. Most find this date change unusual as the company does not tend to move its earnings call and typically reports earnings the day after Kraft Foods, which is reporting on October 23.
- Goldman believes the most likely scenario we will see on October 25 is Altria's management reiterating the company's commitment to a break-up and announcing that the Board has approved resumption of a modest share repurchase program. Firm believes that a spin-off announcement is not likely at this point because the Schwab certification is still pending. Given the Board's conservative stance so far, they envision Altria waiting until the Schwab case is decertified by the 2nd Circuit Court of Appeals before endorsing the breakup, which they believe could take 12-18 months.
They see a neutral to slightly positive reaction to Altria's share price if a share repurchase program is indeed announced. On the positive side, if the company uses 100% of its free cash flow after dividends to fund a share buyback, accretion to earnings could be $0.05-$0.10 in 2007. On the negative side, however, an announcement of a share repurchase could further confirm that the spin-off is delayed until the Schwab certification is overturned.
- Citigroup notes that although difficult to predict exactly what the reasoning may be behind this decision, they believe the most likely reason is that the Board will announce the tax free spin-off of Kraft Foods (KFT). Although there could be other reasons, possibly an acquisition, they are maintaining their thesis that MO's Board realizes that it must act now and spin-off Kraft Foods since there is risk in waiting.
Therefore, they strongly encourage investors to buy MO ahead of 10/25, reiterating Buy rating and $94 price target.
Notablecalls: Yet again we see Goldman hedging their bets. Lucky for us, Citi has a strong opinion what to do with the stock.
- Goldman believes the most likely scenario we will see on October 25 is Altria's management reiterating the company's commitment to a break-up and announcing that the Board has approved resumption of a modest share repurchase program. Firm believes that a spin-off announcement is not likely at this point because the Schwab certification is still pending. Given the Board's conservative stance so far, they envision Altria waiting until the Schwab case is decertified by the 2nd Circuit Court of Appeals before endorsing the breakup, which they believe could take 12-18 months.
They see a neutral to slightly positive reaction to Altria's share price if a share repurchase program is indeed announced. On the positive side, if the company uses 100% of its free cash flow after dividends to fund a share buyback, accretion to earnings could be $0.05-$0.10 in 2007. On the negative side, however, an announcement of a share repurchase could further confirm that the spin-off is delayed until the Schwab certification is overturned.
- Citigroup notes that although difficult to predict exactly what the reasoning may be behind this decision, they believe the most likely reason is that the Board will announce the tax free spin-off of Kraft Foods (KFT). Although there could be other reasons, possibly an acquisition, they are maintaining their thesis that MO's Board realizes that it must act now and spin-off Kraft Foods since there is risk in waiting.
Therefore, they strongly encourage investors to buy MO ahead of 10/25, reiterating Buy rating and $94 price target.
Notablecalls: Yet again we see Goldman hedging their bets. Lucky for us, Citi has a strong opinion what to do with the stock.
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