Despite a worldwide anti-smoking push, the tobacco industry has a surprisingly good outlook at the moment. In an earnings season that wasn’t great for many sectors, tobacco industry leaders posted impressive top and bottom line numbers.
Today we’ll be taking a look at two of the biggest tobacco companies in the world, Reynolds American (RAI- Analyst Report) and Altria Group (MO - Analyst Report). Reynold’s is the manufacturer of several of the world’s best-selling brands including Camel, Winston, KOOL, and Salem. Altria Group is the parent company of Philip Morris USA and produces brands such as Marlboro, Copenhagen, Skoal, and Black & Mild.
Here is a quick graphic covering a few of the main stats:
As you can see, Reynold’s holds the edge with a slightly better Zacks Rank. Although both companies are seeing positive earnings estimate revision activity for their annual numbers, we’ve seen two negative revisions for Altria’s fourth quarter in the last 30 days. Also, Reynold’s latest earnings beat of 8.51% slightly edges out Altria’s beat of 2.78%.
On the other hand, Altria does win in some of the key categories. For one, a slightly higher dividend yield could attract dividend focused investors. Although it’s a rather tight margin, Altria does have a better Forward P/E and could be a slightly better value pick.
Bottom Line
Although Altria does edge out Reynolds in a few categories, it falls short in the most important ones. The Zacks Rank is a proven method for finding winning stocks, and a Zacks Rank #2 (Buy) has shown to return more than a Zacks Rank #3 (Hold) throughout the years. While there are no guarantees in the market, the current trends indicate that Reynolds is a slightly better stock in what is an impressive tobacco market right now.
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