Altria Group is widely expected to announce plans for the spinoff of its Philip Morris International unit this week, but some analysts see limited gains for a stock that already looks more expensive than its peers.
"We now believe the near-term trading upside potential may be modest (up a few percentage points) and instead see the stock gradually rising towards our price target of $79 over the next 12 months," Judy Hong, analyst at Goldman Sachs, said in a research note.
Altria -- which owns Marlboro cigarette makers Philip Morris USA and Phillip Morris International, as well as a stake in brewer SABMiller Plc -- traded at about 15 times estimated 2008 earnings as of Friday, compared with a multiple of 14.8 percent for the Dow Jones U.S. tobacco index.
The stock was up $1.36, or 2 percent, at $70.55 Monday afternoon in anticipation of Wednesday's board meeting, where analysts expect the company will either announce plans for the spinoff of PMI, a large share buyback or both.
"I think they'll be releveraging their balance sheets at both companies and buying back upward of $35 billion of stock combined," said Charles Norton, portfolio manager of the Vice Fund, which held 136,500 Altria shares as of July 31. Norton expects a spinoff and then large share repurchases at both companies.