Shares of Altria (New York: MO) hit an all time high. Let's see how he got there and make sure the clear skies are still in the forecast.
A fresh 52-week high today, Altria is a measure of stability and pricing policies for the tobacco industry.
Altria has a number of factors; it so happens that seems to never change. On the one hand, this haven of investment, which generates a strong cash flow every quarter? Safe investments are critical now more than ever, as European concerns and China's slowdown hit the market is very unsettled. Complies with the cash flow is also used by Altria to pay, which is currently pay dividends of 5%, which grew by 8.6% annually over the past three years. Finally, Altria has brand recognition and pricing, and both are crucial to success in the consumer goods sector. Despite numerous efforts to increase tobacco taxes by state governments, Altria continues to sell tobacco products, because people are hungry for its iconic brand Marlboro.
![]()
However, Altria is not without problems. Advertising campaign by the Centers for Disease Control and Prevention, as well as a push from the Food and Drug Administration to improve the transparency component of cigarettes, threaten the future customer base in Altria. Although it failed, so far, the possibility that warning labels may dominate packages of tobacco manufacturers is a strong possibility.
Perhaps the greatest danger to the Altria should be in the recent growth of discount brands, which is threatened in its higher margin brand Marlboro. (New York: LO) Lorillard at Maverick, Vector Group (New York: VGR) Liggett, and Reynolds American (in the New York State: RAI) Pall Mall brands are cheaper alternatives Marlboro, which can be a problem given the way cost-conscious U.S. consumers have a recession.
With the exception of Vector Group, whose small cash balance gives it less flexibility than its larger counterparts, the remaining three have traded very much in tandem with one another.
There are two factors that all four of them the proportion of tobacco stocks. First, they act strictly within the limits of the United States, so that all are equally subject to strict federal laws regulating the sale of tobacco products. Secondly, they all deal with an extremely high level of debt. Although Vector Group's net debt is only $240 million, that's enough to wipe out all shareholder equity if the company were liquidated. It is also a cause for concern if the company had to face a lot of that; it would seem inevitable trials in the industry, since it only has $ 285 million in cash on its books.
Lorillard was a strong performer in the tobacco industry, having market share at the expense of their peers. Adjusting for fluctuations in trade inventory patterns, volume grew by 1.8% as Lorillard's market share ticked up 40 basis points to a record 14.5%. Its premium brand Newport has received 50 basis points menthol market share. Finally, we Altria and Reynolds American, which are made in reducing its forces in the coming years to contain costs, maintain a solid shareholder return initiatives, and to bring the volumes into line with demand. Altria last quarter showed a rare market share gains for its brand Marlboro in recent years, but still did not stop the total decline.
Now the $ 64,000 question: What's next for Altria? This question will depend on whether it can buoy premium brand Marlboro advertising budget beefier, if it is possible to brands at a discount to lure customers from their peers, and if they can keep their costs under control considering it has a net debt than any of their peers. Our own CAPS community gives the company a highly regarded five stars, with a huge 96.4% of nearly 9,000 members of the expectation that it is superior. Count me in the minority, because of my CAPScall lag behind Altria is currently under water 18 points. Do not, however, seems to me to close that option in the near future.
For me, it seems clear that the days of Altria growth in the past. The company spends an inordinate amount of money on advertising to buoy its Marlboro brand in light of the tendency to discount brands. Lorillard was much stronger on the front of the premium brand than Altria and is one of the few companies that can grow tobacco, the volume of cigarettes in the United States. And why would you even consider investing in the U.S., according to their strict rules of tobacco, when you could just as easily get an international level with Philip Morris International (New York: PM), which sells its products in 180 countries and bypasses heavy tobacco regulations in many parts of the world? I maintain that Altria does decent sales with the candidate here.
Even if tobacco stocks are not the right investment for you, you might be interested in reading about the three companies, our analysts Motley Fool Stock Advisor opinion, is superior in emerging markets. Get the latest free copy of this special report. Thrust over the entrance to Altria? Start by adding it to a free and personalized list. This is a free service of Fools Motley, to keep you abreast of the latest actions, you care about most. Enditem
