2 Tobacco Stocks to Buy (Not Named Philip Morris)

NYSE: BTI | British American Tobacco  Industries, p.l.c.  ADR News, Ratings, and Charts

BTI – Marlboro producer Philip Morris (PM) shifted its focus to mostly heat-not-burn (HNB) products last year to address concerns regarding high, national smoking rates. But the company has yet to receive FDA approval for its HNB offerings. Given this backdrop, we think tobacco stocks British American Tobacco (BTI) and Vector Group (VGR), which possess robust commercial product pipelines, are likely to deliver relatively higher returns than PM. No smoke; read on for details.

Consumer staples have been witnessing a steady rise in demand and prices since the beginning of the COVID-19 pandemic last year, due in-part to panic shopping. The demand for tobacco products, which was declining typically by 3-4% annually in the United States, has also risen over the past year. The industry saw increasing numbers of smokers worldwide last year, likely due in some measure to stress introduced by remote lifestyles. Regardless, rising concerns regarding health worldwide have incentivized most tobacco companies to research and produce the next-generation smokeless products, which are expected to carry  lower health risks.

Philip Morris International, Inc. (PM), the producer top cigarette brand Marlboro, introduced heat-not-burn (HNB) tobacco products last year. PM has even partnered with Altria Group, Inc. (MO) to make HNB products. However, the U.S. Food and Drug Association (FDA) has not granted approval to replace HNBs with regular cigarettes. So, we think it would be best to avoid PM for now.

As an alternative in sector, we think investors should focus on companies that have viable product pipelines, such as  British American Tobacco PLC (BTI) and Vector Group Ltd. (VGR). These stocks have the potential to perform better than PM in the near term.

British American Tobacco PLC (BTI)

Founded in 1902, BTI is a multi-category consumer goods company that delivers tobacco and nicotine products. The company operates through five segments—U.S., Americas and Sub-Saharan Africa, Europe and North Africa, and Asia-Pacific and Middle East. The company manufactures and sells cigarettes, roll-your-own tobacco, cigars, e-cigarettes, medicinal nicotine products and tobacco heating products. It sells its products to retail outlets.

On March 11, BTI entered a strategic collaboration  with Organigram Inc. (OGI) to focus on the research and product development activities of next generation adult cannabis products.  BTI has also invested £126 million in OGI in return for a 19.9% equity stake.

For the year ended December 31, 2020, the company’s revenue from its  U.S. segment has increased 10.6% year-over-year to $11.47 billion. Its  adjusted profit from operations was £11.37, up 4.8% year-over-year. Its adjusted net profit came in at £7.61 billion, which represents an increase of 2.6% year-over-year. And its  adjusted EPS increased 2.4% to 331.7p. The company had assets of £137.69 billion as of  December 31, 2020.

For the fiscal year ending December 2022, analysts expect the BTI’s EPS to improve 6.1% year-over-year to $4.77. Also, a consensus revenue of $36.21 billion is estimated for the same period, representing a 3.6% year-over-year improvement. Analysts expect the stock’s EPS to grow 4.5% per annum over the next five years. The stock has gained 6.2% over the past year and closed yesterday’s trading session at $38.65.

BTI’s strong fundamentals are reflected in its POWR Ratings. The stock has a B overall rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock has an A grade for Stability, and a B grade for Sentiment and Momentum. We have also graded BTI for Value, Quality, and Growth. Click here to access all BTI’s ratings.

BTI is ranked #3 of 11 stocks in the A-rated Tobacco industry.

Vector Group Ltd. (VGR)

Based in Miami, Florida, VGR manufactures and sells cigarettes in the United States. The company operates through three segments—Tobacco, E-Cigarettes and Real Estate. It sells cigarettes through its Liggett Group LLC and Vector Tobacco Inc. subsidiaries. Its real estate business is administered through its New Valley LLC subsidiary. It markets and sells its cigarettes to wholesalers and distributors of tobacco and convenience products, as well as grocery, drug, and convenience store chains.

On March 1, VGR launched New Valley Ventures to develop next-generation technologies in the property technology space. New Valley Ventures has acquired an ownership stake in Rechat, a lead-to-close fully mobile technology dashboard for real estate agents. VGR’s Board of Directors has declared a regular quarterly cash dividend of $0.20 per share on its common stock. In January, VGR priced $875 million of  5.75% senior secured notes.

VGR’s total revenue was $554.59 million for the fourth quarter, ended December 31, 2020, which represents an improvement of 26.2% year-over-year. Its gross profit was $177.53 million, up 29% year-over-year. The company’s income from operations increased 91.6% year-over-year to $87.33 million. Its adjusted net income was $32.56 million, up 82.4% year-over-year. Also, the company’s adjusted EPS increased 90.9% year-over-year to $0.21.

A  consensus EPS estimate of $0.22 for the next quarter, ending June 30, 2021, represents a 29.4% rise year-over-year. VGR surpassed the Street’s consensus EPS estimates in three the trailing four quarters. Also, its consensus revenue estimate of $559.30 million for the next quarter represents a 5.6% rise from the prior-year period. Analysts expect the stock’s EPS to grow 6.4% per annum over the next five years. The stock has rallied 52.6% over the past year to close yesterday’s trading session at $14.04.

It’s no surprise that VGR has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Growth, and a B grade for Value, Momentum, Stability, and Quality. Click here to see VGR’s additional POWR Ratings for Sentiment.

VGR is ranked #1 in the same industry.

The POWR Ratings assess stocks by 118 different factors, each with its own weighting.


BTI shares were trading at $39.77 per share on Thursday afternoon, up $1.12 (+2.90%). Year-to-date, BTI has gained 8.11%, versus a 9.54% rise in the benchmark S&P 500 index during the same period.


About the Author: Sweta Vijayan


Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
BTIGet RatingGet RatingGet Rating
VGRGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Bull Run or Bull S#*t?

The S&P 500 (SPY) has impressively broken out above 4,000. However, it seems that ONLY large caps are moving higher while smaller stocks are actually in the red. Why is this? And what does it mean for the future health of this bull market? Read on below for the answers…

:  |  News, Ratings, and Charts

3 Shipping Stocks Rated Strong Buy

Shipping stocks are buoyant as the global economy begins its rebound from the economic effects of the COVID-19 pandemic. We think ZIM Integrated Shipping Services (ZIM), Matson (MATX) and Global Ship Lease (GSL) are three companies that are well positioned to benefit from a sector resurgence and, as such, warrant a closer look now by investors. Let’s evaluate these names more closely.

:  |  News, Ratings, and Charts

Top 10 Growth Stocks

Let me prove beyond a shadow of a doubt that we are in the midst of a stock market bubble. Even better, let me explain why stocks (SPY) will rise for another 12-24 months so you can ride it higher and then parachute out at the peak. And just for good measure I will share my top 10 stocks for today’s market. Read on below for more...

:  |  News, Ratings, and Charts

Avoid These 3 Cathie Wood Stocks in April

Cathie Wood’s contrarian investment strategy may not be ideal for short-term, risk-averse investors with limited funds because most of Wood’s bets require a considerable holding period. So, we think Wood favorites Shopify (SHOP), Spotify (SPOT), and Zillow (Z), which could witness a pullback in the near term, are best avoided now.

:  |  News, Ratings, and Charts

Top 10 Growth Stocks

Let me prove beyond a shadow of a doubt that we are in the midst of a stock market bubble. Even better, let me explain why stocks (SPY) will rise for another 12-24 months so you can ride it higher and then parachute out at the peak. And just for good measure I will share my top 10 stocks for today’s market. Read on below for more...

Read More Stories

More British American Tobacco Industries, p.l.c. ADR (BTI) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All BTI News