Tobacco stocks have diverged in the U.S. this year, with
(ticker: MO) falling into the red as
Philip Morris International
(PM) has rallied ahead of the market. That pattern may continue through the end of 2019, according to Bernstein.
The back story. It’s a time of change in the tobacco industry. While legacy players are planning for a cigarette-free future, the stocks are still subject to worries about lower cigarette volumes and regulatory changes. Earlier this year, Food and Drug Administration Commissioner Scott Gottlieb announced his plan to step down; that led some to that the agency could moderate its tobacco stance, and set the stage for more stock gains for the industry. But some analysts remain concerned about the government’s plans to regulate flavoring, both in traditional and e-cigarette. Philip Morris, which focuses on the international market and has seen success with its heat-not-burn iQOS device, is up 25% year to date, while Altria is down 6.5%.
What’s new. Bernstein analyst Callum Elliott writes that plenty of uncertainty remains in the tobacco landscape, including regulatory and legal issues and the evolving market dynamics between traditional tobacco and reduced-risk products. That uncertainty, he believes, has been a major driver for underperformance in Altria shares as well as selloffs in Philip Morris stock despite strong earnings.
“The bad news is: the uncertainty surrounding the sector isn’t likely to dissipate in the near future, which means we continue to believe that a broad-based re-rating of the sector is unlikely in the short-term,” Elliott writes.
But even more clarity could be bad news. While the first half of the year was largely quiet on the regulatory front, the analyst expects more commentary in the coming months about the government’s plans, which could lead to negative headlines. “So you need a thick skin to invest in these tobacco names today, and investors should be alert to these near-term risks,” he adds.
Looking ahead. But it isn’t all bad for the sector. Elliott writes that bargain hunters can do well, as “valuation is looking increasingly detached from fundamentals.” Traditional combustible cigarettes are still funding robust cash flows at big tobacco firms, and pricing power remains. Thus investors willing to look at the positives could be rewarded. “But it may be a bumpy ride—strap in.”
Elliott’s advice is to buy Philip Morris stock over Altria. The former is his top pick globally, given the company’s recent robust earnings and the growth potential of iQOS.
（售票员： MO ）跌入红色
Philip Morris International
后面的故事。这是烟草行业发生变化的时候。尽管传统企业正计划实现无烟的未来，但这些股票仍面临着卷烟销量下降和监管改革的担忧。今年早些时候，美国食品药品监督管理局（Food and Drug Administration）局长斯科特·戈特利布宣布了他的计划，他将下台；这导致一些人认为该机构可以缓和其烟草立场，并为该行业的更多库存收益奠定了基础。但一些分析师仍对中国政府监管传统和电子烟口味的计划感到担忧。关注国际市场的菲利普莫里斯公司( Philip Morris )今年迄今股价上涨25%，奥驰亚股价下跌6.5%。
什么是新的。伯恩斯坦( Bernstein )分析师卡伦•艾略特( Callum Elliott )写道，烟草行业仍存在许多不确定性，包括监管和法律问题，以及传统烟草与低风险产品之间不断演变的市场动态。他认为，这种不确定性是奥驰亚股票表现不佳的主要驱动因素，也是菲利普莫里斯股票尽管收益强劲而出现抛售的主要原因。
埃利奥特的建议是在奥驰亚上空购买菲利普莫里斯公司的股票。考虑到该公司近期强劲的盈利和 iQOS 的增长潜力，前者是他在全球的首选。