The global tobacco market is expected to grow at a CAGR of 2.5% by 2030 due to the rising tobacco consumption in some developing regions. The market’s willingness to embrace innovation highlights its flexibility in responding to changing consumer tastes and advancements in tobacco-related technologies.

Additionally, the market is evolving with strong growth in alternative products like e-cigarettes and nicotine pouches, steady demand for menthol cigarettes, rising premium tobacco sales, expanding online channels, and robust innovation efforts by major players.

Against this backdrop, let’s compare two tobacco stocks to analyze which stock offers greater returns: Altria Group, Inc. (MO) and Universal Corporation (UVV).

The Case for Altria Group, Inc. Stock

With a $86.11 billion market cap, Altria Group, Inc. (MO) manufactures and sells smokeable and oral tobacco products in the United States.

MO’s stock has gained 1.5% over the past three months to close the last trading session at $50.81.

MO’s 69.76% trailing-12-month gross profit margin is 93.6% higher than the 36.03% industry average. Also, its 58.56% trailing-12-month EBIT margin is 508.7% higher than the 6.62% industry average.

MO’s net revenues were reported at $5.54 billion during the third quarter that ended September 30, 2024. Its operating income grew 2% from the year-ago value to $3.15 billion. The company’s net earnings of $2.29 billion indicate growth of 5.9% from the prior year’s quarter.

Analysts expect MO’s revenue for the fourth quarter (ended December 2024) to increase marginally year-over-year to $5.04 billion. The consensus EPS estimate of $1.28 for the same quarter indicates an 8.4% year-over-year improvement.

MO’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has an A grade for Quality and a B for Stability. MO is ranked #2 out of 9 stocks in the Tobacco industry.

In addition to the POWR Ratings I’ve just highlighted, you can see MO’s ratings for Momentum, Growth, Value, and Sentiment here.

The Case for Universal Corporation Stock

Valued at $1.24 billion by market cap, Universal Corporation (UVV) engages in sourcing, processing, and supplying leaf tobacco and plant-based ingredients worldwide. It operates through two segments, Tobacco Operations and Ingredients Operations. 

Shares of UVV have plunged 7.9% over the past month to close the last trading session at $50.29.

In terms of the trailing-12-month net income margin, UVV’s 4.31% is 1.5% higher than the 4.24% industry average. However, its 2.50% trailing-12-month CAPEX/Sales is 18.9% lower than the 3.09% industry average.

For the third quarter that ended June 30, 2024, UVV reported sales and other operating revenues of $597.05 million, up 15.3% from the prior year’s quarter. The company’s net income came in at $130 thousand and $0.01 per share, as compared to a net loss of $2.06 million and $0.08 per share in the previous year’s quarter.

UVV’s fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to Neutral in our proprietary rating system.

UVV has a C grade for Growth and Stability. It is ranked #7 in the same industry.

Click here for the additional POWR Ratings for UVV (Value, Sentiment, Momentum, and Quality).

Altria Group (MO) vs. Universal Corporation (UVV): Which Tobacco Stock Offers Greater Returns?

The tobacco industry is witnessing a trend of new product launches that are intriguing to consumers. The excessive marketing campaigns run by the major companies have also been a significant factor in sustaining the industry. 

Leading tobacco companies MO and UVV stand to capitalize on the optimistic industry outlook. However, MO’s solid profitability might make it the better tobacco stock pick.

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Tobacco industry here.

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MO shares were trading at $51.04 per share on Thursday afternoon, up $0.23 (+0.45%). Year-to-date, MO has declined -2.39%, versus a 3.71% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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