In my opinion, Fifth Third Bancorp (NASDAQ:FITB) could see $20 per share if management can maintain EPS growth through the end of 2013. Second quarter results will be released on July 18 before the market open.
Tobacco giant
Altria Group Inc (NYSE:MO) is the publicly-traded holding company of Philip Morris USA, parent of the popular Marlboro brand of cigarettes. The company also owns the John Middleton brand of cigars and 26.9% of
The Richmond, VA headquartered Altria Group Inc (NYSE:MO) reported first quarter earnings on April 25. Management reported $0.54 on revenue of $5.53 billion and reaffirmed full-year guidance of $2.35 to $2.41, a 6% to 9% increase in earnings compared to 2012. Altria Group Inc (NYSE:MO) is the undisputed leader in the U.S. cigarette market, but the industry faces long-term headwinds due to falling cigarette consumption and increased regulation.
Altria Group Inc (NYSE:MO) also reviewed its capital allocation program, stating it plans to return 80% of diluted EPS to shareholders through dividends. The company’s board also approved a $300 million buyback program, an insignificant amount for Altria’s $73 billion in market capitalization.
Board member Dinyar Devitre purchased 26,700 shares of Altria Group for $37.04 per share. The transaction value amounted to $989,000 when the stock was purchased on May 22. Mr. Devitre is a former senior vice president and chief financial officer at Altria Group Inc (NYSE:MO), where he served from 2002 to 2008.
In times of fiscal stress, state legislators are keen on raising as much funds as possible, a negative for Altria Group Inc (NYSE:MO) and its customers. Minnesota recently approved a $1.60 per pack tax rate on cigarettes, which will help reduce a $627 million budget deficit over the next two years.
Despite recent insider buying, I prefer Philip Morris International Inc. (NYSE:PM) over its domestic counterpart Altria Group.
Foolish takeaway
Clearly, a significant amount of research is necessary to determine the motivation for insider buying activity.
Specialty retailer Cabelas is flourishing as the gun control debate has caused avid outdoorsmen to purchase an excess number of firearms. The insider at Cabelas is likely betting that record sales will continue into the second half of 2013.
Regional lender Fifth Third Bancorp is performing well after regulators approved its capital plan in March. The Federal Reserve did not object to a $400 million share repurchase plan, a possible reason for optimism. Earnings growth is also accelerating.
Finally, the motivation for insider buying at Altria Group is unclear, as Devitre has been on the board since 2008. I prefer the long-term fundamentals at Philip Morris International Inc. (NYSE:PM) instead.
Do you agree or disagree? Which of the three stocks is your personal favorite? Let me know in the comments section below.
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John Macris owns shares of Fifth Third Bancorp. The Motley Fool owns shares of Fifth Third Bancorp. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Insider Transactions From Barron’s Latest Issue originally appeared on Fool.com is written by John Macris.
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