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Altria vs. Philip Morris: Who's the Better Long-Term Bet?

Altria's struggles signal a turbulent path for the future. The continued decline in cigarette sales and misguided investments highlight the challenges facing the company. In contrast, Philip Morris exhibits growth, making it a potentially more attractive investment for long-term holders.

Date: 
AI Rating:   4

Investors Assessing Altria & Philip Morris

In a recent report analyzing the tobacco industry, Altria Group (MO) faces significant challenges as evidenced by a 10.2% decline in cigarette volumes in 2024. This trend is alarming and reflects ongoing headwinds for the core business. In contrast, Philip Morris International (PM) reported a 0.6% increase in cigarette volumes, suggesting that its operations are more resilient.

Altria's decision to spin off Philip Morris to focus on the North American market raises questions about its strategic direction. This spinoff seems to have deprived Altria of its best-performing business segment, significantly impacting its competitive positioning. As of now, Altria relies on cigarettes for around 90% of its revenue, with limited success in diversifying into products like Juul and NJOY.

Future Prospects

Although Altria offers an enticing dividend yield of 6.9%, the long-term health of its business remains uncertain. The company continues to face scrutiny due to declining volumes and a lack of innovation in expanding beyond traditional tobacco products. This creates concerns over the sustainability of its income stream from dividends, despite its short-term yield appeal.

On the other hand, Philip Morris is advancing its smoke-free product line, which accounts for a significant portion of its revenue and gross profit. This strategic pivot positions Philip Morris more favorably in the evolving tobacco landscape. The company’s ability to innovate and explore non-cigarette products sets it apart from Altria.

Conclusion

For investors with a time horizon of 1 to 3 months, Altria may pose more risks, particularly with ongoing volume declines and reliance on a shrinking market. Conversely, Philip Morris appears to be better positioned for future growth, especially with its focus on smoke-free alternatives. Overall, Philip Morris is likely to attract long-term investment strategies due to its healthier business fundamentals.

Stocks:  MO PM