When it comes to controversial publicly traded investments, few are as notorious as tobacco stocks. Of course, it wasn’t always this way. Notably, the television series Mad Men reflected the cultural norms of the time, which in some ways celebrated smoking.
Concerted efforts over the last several years have considerably dented smoking prevalence rates. However, the Covid-19 may have altered certain behaviors, including tobacco use. Notably, economic disruptions can also lift indulgences as a coping mechanism. Sociologically, there is evidence that smoking rates are on the rise again.
Another element that keeps tobacco stocks relevant is the rise in vaporizers or e-cigarettes. These devices offer a cleaner, less odious profile, making the tobacco consumption process more acceptable in non-smoking circles.
To be fair, it’s not exactly the most wholesome arena. However, it can be quite intriguing for your portfolio. Here are some tobacco stocks to consider.
Philip Morris (PM)
Philip Morris factory offices in Lithuania. PM stock.
Source: Vytautas Kielaitis / Shutterstock
One of the top names in tobacco stocks, Philip Morris (NYSE:PM) features products sold in over 180 countries. Per its public profile, the most recognized and best-selling product under the corporate umbrella is Marlboro. Since the start of the year, PM stock dipped around 2%. While not necessarily encouraging, that’s not the end of the story.
Yes, some of the red ink is deserved based on the performance of the company’s most recent earnings report. Data from Yahoo Finance reveals that the tobacco giant posted earnings per share of $1.36. However, analysts anticipated a print of $1.45. However, let’s also consider that in the first through third quarters, Philip Morris averaged a positive earnings surprise of 5%.
For fiscal 2024, experts believe that revenue will land at $37.17 billion. That would represent a 5.4% lift from last year’s tally of $35.25 billion. And in 2025, they believe a top line of $39.56 billion is in order. If so, we’d be dealing with year-over-year growth of 6.4%.
Lastly, PM features a moderate buy consensus view with an average price target of $101.94. It’s one of the tobacco stocks to put on your watch list.
Turning Point Brands (TPB)
image of hands holding handful of processed tobacco
Source: Shutterstock
If you’re looking for a growth opportunity among tobacco stocks, Turning Point Brands (NYSE:TPB) could be an intriguing idea. It’s not that TPB doesn’t pay a dividend. It does but with a yield of only 0.95%, it’s not exactly generous. On the other end of the scale, Philip Morris features a forward annual dividend yield of 5.53%.
However, Turning Point enjoys the better capital gains potential. Since the start of the year, shares moved up 6%. Over the past 52 weeks, it gained over 34%. That’s not bad at all, especially ranking among tobacco stocks. It’s also doing its job in the financial performance department.
In the most recent Q4 earnings print, Turning Point delivered EPS of 79 cents, handily beating the consensus view of 68 cents. It also beat per-share profitability estimates between Q1 through Q3. The average positive earnings surprise? Try 30%.
Now, analysts anticipate a slowdown of growth, projecting only $382.6 million in sales. That compares poorly to last year’s print of $405.39 million. Still, the experts also believe shares will hit $34, which implies 23% upside potential.
British American Tobacco (BTI)
British American Tobacco logo on a building
Source: DutchMen / Shutterstock.com
One of the top international tobacco stocks, British American Tobacco (NYSE:BTI) is the largest company in its field based on net sales. It has operations in around 180 countries. Further, it commands several popular brands, including Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans. Since the start of the year, BTI stock gained a bit more than 2%.
Despite a solid start to the new year, British American represents one of the higher-risk ideas. Over the past 52 weeks, shares have slipped more than 16%. And in the trailing five years, they’re down more than 25%. To be fair, some of that stems from questions surrounding its recent financial performance.
In Q4, the company reported EPS of $2.45, missing the consensus target of $2.49. For revenue, it generated $17.34 billion against a target of $18.85 billion. Still, with tobacco use increasing in the U.S., demand could also be rising in other parts of the world.
At this moment, no one covers BTI, though the last rating was a “buy” from Morgan Stanley. To sweeten the pot, British American offers a 9.46% dividend yield. Think about it.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
