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RRPs Gaining Popularity: 3 Tobacco Stocks to Watch in 2021
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The Tobacco industry has long been struggling with weak cigarette volumes, thanks to strict marketing and manufacturing policies imposed by regulatory authorities. Also, campaigns against tobacco consumption have increased consumers’ awareness, resulting in lower smoking rates. Industry experts also cited that the pandemic has played a substantial role in further moderating cigarette smoking rates. Additionally, pandemic-led travel restrictions and sluggish store traffic are affecting cigarette sales volumes.
While the struggle with weak cigarette sales is likely to continue, prospects for low-risk tobacco alternatives look quite encouraging. Markedly, the tobacco industry players are benefiting from rising demand for reduced risk products (RRPs) such as vaping, e-cigarettes and heat-not-burn variants. These products, owing to their beneficial claims, are largely being accepted by individuals trying to quit or reduce cigarette consumption.
Driven by growing enthusiasm toward RRPs, tobacco companies are making substantial investments in this arena. The companies are engaging in innovations to make these products user friendly and energy efficient. Markedly, the U.S. Food and Drug Administration (FDA) is keeping a close tab on the manufacturing and marketing policies of such items to regulate their usage among the youth.
That said, we are highlighting three companies from the Zacks Tobacco industry, which are gaining from their strong business-expansion endeavors in the RRPs or smokeless products arena. The industry currently carries a Zacks Industry Rank #101, which places it in the top 40% of more than 250 Zacks industries.
Price Performance
3 Tobacco Stocks to Keep a Close Eye on
The Kentucky-based renowned tobacco company Turning Point Brands, Inc. (TPB - Free Report) is first on our list. This Zacks Rank #2 (Buy) company manufactures and markets a wide range of tobacco products under three segments namely; Smokeless, Smoking and NewGen Products. Its smokeless product category is gaining from rising sales of Stoker’s MST. Also, growth in chewing tobacco is an upside for this segment. The company is well positioned to gain from growth in smokeless products and is on track with product introductions. Its NewGen segment is witnessing growth on the back of elevated e-commerce sales as well as popularity of brands such as Solace and Nu-X. Turning Point submitted Premarket Tobacco Applications to the FDA for 250 products in the vapor category. The approval for these products is likely to boost the company’s strength in NewGen products. Moreover, the Zacks Consensus Estimate for 2021 sales and earnings indicates an improvement of 4.4% and 6.5%, respectively, from the year-ago period’s levels. Impressively, the stock has rallied about 42.5% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Philip Morris International Inc. (PM - Free Report) is one of the industry pioneers in driving the shift from cigarettes to RRPs. The company’s IQOS is one of the leading RRPs in the industry. In fact, total users of IQOS at the end of third-quarter 2020 were estimated to be about 16.4 million globally. We note that IQOS is currently the only heat-not-burn product in the U.S. market, which has been approved by the FDA. The company expects consistent growth in the heated tobacco category, and therefore has been committed toward expanding these products. It is on track to achieve its 2021 goal of 90-100 billion shipments of heated tobacco units. Moreover, Philip Morris started commercializing IQOS VEEV, which is its new product in the vapor category. The company announced a partnership with South Korea’s KT&G earlier this year to commercialize the latter’s smoke-free products outside the country. This Zacks Rank #3 (Hold) company’s shares have increased 9.7% in the past three months. Notably, the Zacks Consensus Estimate for 2021 sales and earnings indicates a rise of 8% and 12.3%, respectively, from the year-ago period’s levels.
Altria Group, Inc. (MO - Free Report) is another potential pick. This Zacks Rank #3 (Hold) company has a robust portfolio of cigarettes, RRPs and oral tobacco products. The marketing and technology sharing agreement between Altria and Philip Morris, pertaining to the sale of IQOS in the United States is yielding. Apart from this, the company’s HeatSticks has also been performing well. Altria (through its subsidiary Helix Innovations) holds 80% stake in certain companies of Burger Group, which is engaged in the commercialization of the oral tobacco-derived nicotine (TDN) pouch product — on! Management believes that on! is a worthwhile addition to Altria’s smokeless portfolio, as oral TDN products are gaining popularity in the United States owing to their low-risk claims. Altria has also undertaken efforts to expand in the cannabis industry, as evident from the acquisition of stakes of the Canada-based cannabis company, Cronos Group. We note that shares of this tobacco biggie have gained 8.2% in the past three months. The Zacks Consensus Estimate for 2021 sales and earnings indicates an improvement of 2% and 4.5%, respectively, from the year-ago period’s levels.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?
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RRPs Gaining Popularity: 3 Tobacco Stocks to Watch in 2021
The Tobacco industry has long been struggling with weak cigarette volumes, thanks to strict marketing and manufacturing policies imposed by regulatory authorities. Also, campaigns against tobacco consumption have increased consumers’ awareness, resulting in lower smoking rates. Industry experts also cited that the pandemic has played a substantial role in further moderating cigarette smoking rates. Additionally, pandemic-led travel restrictions and sluggish store traffic are affecting cigarette sales volumes.
While the struggle with weak cigarette sales is likely to continue, prospects for low-risk tobacco alternatives look quite encouraging. Markedly, the tobacco industry players are benefiting from rising demand for reduced risk products (RRPs) such as vaping, e-cigarettes and heat-not-burn variants. These products, owing to their beneficial claims, are largely being accepted by individuals trying to quit or reduce cigarette consumption.
Driven by growing enthusiasm toward RRPs, tobacco companies are making substantial investments in this arena. The companies are engaging in innovations to make these products user friendly and energy efficient. Markedly, the U.S. Food and Drug Administration (FDA) is keeping a close tab on the manufacturing and marketing policies of such items to regulate their usage among the youth.
That said, we are highlighting three companies from the Zacks Tobacco industry, which are gaining from their strong business-expansion endeavors in the RRPs or smokeless products arena. The industry currently carries a Zacks Industry Rank #101, which places it in the top 40% of more than 250 Zacks industries.
Price Performance
3 Tobacco Stocks to Keep a Close Eye on
The Kentucky-based renowned tobacco company Turning Point Brands, Inc. (TPB - Free Report) is first on our list. This Zacks Rank #2 (Buy) company manufactures and markets a wide range of tobacco products under three segments namely; Smokeless, Smoking and NewGen Products. Its smokeless product category is gaining from rising sales of Stoker’s MST. Also, growth in chewing tobacco is an upside for this segment. The company is well positioned to gain from growth in smokeless products and is on track with product introductions. Its NewGen segment is witnessing growth on the back of elevated e-commerce sales as well as popularity of brands such as Solace and Nu-X. Turning Point submitted Premarket Tobacco Applications to the FDA for 250 products in the vapor category. The approval for these products is likely to boost the company’s strength in NewGen products. Moreover, the Zacks Consensus Estimate for 2021 sales and earnings indicates an improvement of 4.4% and 6.5%, respectively, from the year-ago period’s levels. Impressively, the stock has rallied about 42.5% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Philip Morris International Inc. (PM - Free Report) is one of the industry pioneers in driving the shift from cigarettes to RRPs. The company’s IQOS is one of the leading RRPs in the industry. In fact, total users of IQOS at the end of third-quarter 2020 were estimated to be about 16.4 million globally. We note that IQOS is currently the only heat-not-burn product in the U.S. market, which has been approved by the FDA. The company expects consistent growth in the heated tobacco category, and therefore has been committed toward expanding these products. It is on track to achieve its 2021 goal of 90-100 billion shipments of heated tobacco units. Moreover, Philip Morris started commercializing IQOS VEEV, which is its new product in the vapor category. The company announced a partnership with South Korea’s KT&G earlier this year to commercialize the latter’s smoke-free products outside the country. This Zacks Rank #3 (Hold) company’s shares have increased 9.7% in the past three months. Notably, the Zacks Consensus Estimate for 2021 sales and earnings indicates a rise of 8% and 12.3%, respectively, from the year-ago period’s levels.
Altria Group, Inc. (MO - Free Report) is another potential pick. This Zacks Rank #3 (Hold) company has a robust portfolio of cigarettes, RRPs and oral tobacco products. The marketing and technology sharing agreement between Altria and Philip Morris, pertaining to the sale of IQOS in the United States is yielding. Apart from this, the company’s HeatSticks has also been performing well. Altria (through its subsidiary Helix Innovations) holds 80% stake in certain companies of Burger Group, which is engaged in the commercialization of the oral tobacco-derived nicotine (TDN) pouch product — on! Management believes that on! is a worthwhile addition to Altria’s smokeless portfolio, as oral TDN products are gaining popularity in the United States owing to their low-risk claims. Altria has also undertaken efforts to expand in the cannabis industry, as evident from the acquisition of stakes of the Canada-based cannabis company, Cronos Group. We note that shares of this tobacco biggie have gained 8.2% in the past three months. The Zacks Consensus Estimate for 2021 sales and earnings indicates an improvement of 2% and 4.5%, respectively, from the year-ago period’s levels.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>