Market Overview

Bernstein Initiates On Tobacco Stocks: Philip Morris 'Leads The Way In The New Nicotine World'

Bernstein Initiates On Tobacco Stocks: Philip Morris 'Leads The Way In The New Nicotine World'

Tobacco stocks are facing an uphill battle when it comes to regulation and public perception, but one Wall Street analyst says tobacco companies have a long track record of success for investors.

The Analyst

Bernstein analyst Callum Elliott has initiated coverage of Philip Morris International Inc. (NYSE: PM) and Imperial Tobacco Group (OTC: IMBBY) with Outperform ratings. Elliott also initiated coverage of British American Tobacco PLC (NYSE: BTI), Altria Group Inc (NYSE: MO) and Swedish Match AB (OTC: SWMAF) with Market Perform ratings.

The Thesis

Altria, British American and Imperial stocks have generated an average annual total return of between 13 percent and 15 percent since 1998, Elliot said, and declines in volume have been offset by pricing leverage. Now that the world of nicotine is transitioning away from tobacco, the companies willing to embrace the transition will be best-positioned in the long-term.

At this point, Elliott feels Philip Morris is the only company to welcome the innovator’s dilemma.

“The good news is that PMI has real expertise, consumer know-how and financial firepower that, we think, should allow them to prosper in the New Nicotine World,” Elliott wrote in a note.

Philip Morris has already made a $5-billion investment in developing a brand new portfolio of next-generation nicotine products that generated a combined $3.6 billion in high-growth revenue in 2017. By 2019, Bernstein estimates these innovative products will make up nearly a fourth (24 percent) of Philip Morris’ total revenue.

As other tobacco companies follow suit in putting together sustainable business plans and rolling out new products, the potential winners and losers in the space will become more clear to investors.

Price Action

Here’s how the five stocks mentioned reacted Tuesday:

  • Swedish Match was up 1.3 percent.
  • Altria was down 1 percent.
  • British American was down 3.3 percent.
  • Imperial Tobacco was down 1.6 percent.
  • Philip Morris was flat.

Related Links:

Analyst On Cannabis Stocks: You Have To Be Careful With Valuations

Tobacco's Big Week

Latest Ratings for PM

Jul 2019UpgradesEqual-WeightOverweight
Jul 2019MaintainsOverweight
May 2019UpgradesUnderweightEqual-Weight

View More Analyst Ratings for PM
View the Latest Analyst Ratings

Posted-In: Bernstein Callum Elliott tobaccoAnalyst Color Initiation Analyst Ratings Best of Benzinga


Related Articles (BTI + IMBBY)

View Comments and Join the Discussion!

Latest Ratings

LOWRBC CapitalMaintains129.0
MARRBC CapitalMaintains148.0
CRLSunTrust Robinson HumphreyMaintains162.0
CFRSunTrust Robinson HumphreyMaintains105.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at

Cowen: StockX's Influence In Footwear Is Accelerating After $44M Funding Round

Rapper Berner Talks Cannabis Business Ventures, Shares Advice For Entrepreneurs