Industry Overview - The Zacks Tobacco industry is facing significant challenges due to persistent pressure on cigarette volumes, driven by inflation, changing consumer preferences, and stringent regulations [1][4] - Traditional cigarette consumption is declining due to rising health awareness and tighter restrictions on tobacco sales and marketing [1][4] - The industry includes companies that manufacture cigarettes and various tobacco and nicotine-based products, with many firms also producing reduced-risk products (RRPs) like e-cigarettes and heated tobacco [3] Current Trends - Persistent pressure on cigarette volumes is attributed to inflation and economic factors that have altered consumer spending behavior, alongside regulatory restrictions impacting sales [4] - Elevated costs from global inflation affecting key inputs such as tobacco leaf, energy, and labor are adding to margin pressures, despite companies attempting to offset these through pricing actions [5] - The rising popularity of smoke-free options, including heated tobacco and vapor products, is reshaping the industry, with major companies investing in these categories to align with consumer preferences [6] Company Performance - Leading companies like Philip Morris International, British American Tobacco, and Altria Group are focusing on smoke-free alternatives to demonstrate resilience in a challenging environment [2] - Philip Morris is recognized for its transformative shift towards smoke-free products, with flagship offerings like IQOS and ZYN gaining traction [17] - British American Tobacco is advancing its transition through a diversified strategy, with brands like Vuse and glo gaining market share [21] - Altria is evolving its business model by prioritizing reduced-risk products and leveraging its strong brand portfolio, including Marlboro [25] Financial Metrics - The Zacks Tobacco industry currently holds a Zacks Industry Rank of 218, placing it in the bottom 10% of over 243 Zacks industries, indicating dull near-term prospects [7][8] - The industry has gained 16.1% over the past year, underperforming the S&P 500's growth of 18.7% but outperforming the broader Zacks Consumer Staples sector, which declined by 4.4% [10] - The industry is trading at a forward 12-month price-to-earnings (P/E) ratio of 14.61X, compared to the S&P 500's 20.8X and the sector's 16.39X [13] Earnings Estimates - The Zacks Consensus Estimate for Philip Morris's 2026 and 2027 earnings per share (EPS) remains unchanged at $8.49 and $9.30, respectively [18] - For British American Tobacco, the EPS estimates for 2026 and 2027 have decreased slightly to $4.87 and $5.29, respectively [22] - Altria's EPS estimates for 2026 and 2027 remain unchanged at $5.61 and $5.78, respectively [26]

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Investment Rating - The investment rating for the company is "Buy" [1] Core Insights - The report indicates that the new tobacco business is progressing steadily, with guidance for double-digit growth in 2026 [2] - The company expects revenue growth of 4% in 2026, followed by 3% in both 2027 and 2028, with net profit growth of 6%, 7%, and 5% respectively during the same period [8] Financial Summary - Total revenue (in million GBP) is projected as follows: 2024: 25,867; 2025: 25,610; 2026E: 26,634; 2027E: 27,433; 2028E: 28,256, with a year-on-year change of -5%, -1%, +4%, +3%, and +3% respectively [5] - Gross profit is expected to increase from 2,406 million GBP in 2024 to 11,906 million GBP in 2028 [5] - Net profit is forecasted to rise from 3,068 million GBP in 2024 to 9,246 million GBP in 2028, with year-on-year changes of -121%, +153%, +6%, +7%, and +5% respectively [5] - The price-to-earnings (PE) ratio is projected to decrease from 43.03 in 2024 to 14.28 in 2028 [5] Market Performance - The company's stock price has ranged between 36.35 and 63.22 USD over the past 52 weeks, with a current market capitalization of 132,002 million USD [5]

Core Viewpoint - The article emphasizes the importance of understanding a company's business model and future potential rather than solely relying on financial metrics for investment decisions [2]. Group 1: Investment Philosophy - The investment approach focuses on comprehending the essence of a business and its value creation in the present and future [2]. - Financial reports are viewed as reflections of the past and present, with the analysis beginning from a fundamental understanding of the company [2]. - The long-term perspective is crucial, with an emphasis on evaluating a company's position in the market over the next 5-10 years [2]. Group 2: Analysis Methodology - The analysis prioritizes understanding management's current actions to capture future markets [2]. - Financial metrics such as multipliers, balances, and charts are considered secondary and should only support the fundamental investment thesis [2].

Company Overview - Ahold NV is a member of the Consumer Staples group, ranking 14 in the Zacks Sector Rank among 179 companies [2] - The company currently holds a Zacks Rank of 2 (Buy), indicating a favorable investment outlook [3] Performance Metrics - Ahold NV has returned approximately 19.4% year-to-date, significantly outperforming the average gain of 6.6% in the Consumer Staples group [4] - The Zacks Consensus Estimate for Ahold NV's full-year earnings has increased by 2.6% over the past quarter, reflecting improved analyst sentiment [3] Industry Context - Ahold NV belongs to the Consumer Products - Staples industry, which includes 36 companies and is currently ranked 162 in the Zacks Industry Rank, with an average gain of 5% year-to-date [5] - British American Tobacco, another stock in the Consumer Staples sector, has also shown strong performance with a year-to-date return of 7.6% [4][6]

Core Insights - Philip Morris International (PM) reported full-year 2025 revenue of $40.6 billion, with smoke-free products contributing approximately $17 billion, while British American Tobacco (BTI) reported Q4 2025 EPS of $2.55, exceeding estimates, and raised its 2026 quarterly dividend to $0.835 from $0.749 [1] - PM's IQOS maintained a 76% global market share in heated tobacco, and ZYN saw a 37% growth in shipments in the U.S. with 794 million cans shipped [1] - PM trades at a trailing P/E of 23x, reflecting consistent earnings and growth in smoke-free products, while BTI trades at 13x, offering a higher yield but with a more volatile earnings history [1] Financial Performance - PM's adjusted operating income margin expanded to 40.4%, with management guiding for adjusted diluted EPS of $8.38 to $8.53 in 2026, indicating an expected growth of 11% to 13% [1] - BTI's Q4 2025 EPS of $2.55 beat the estimate of $2.51, but its smoke-free brands are growing at a slower pace compared to PM [1] - PM's revenue growth is driven by its smoke-free segment, while BTI's earnings history shows inconsistencies, including a -$0.66 EPS in Q4 2024 and a significant miss in Q2 2025 [1] Investment Considerations - PM is positioned as a growth stock with a focus on smoke-free transformation, appealing to investors seeking capital appreciation alongside dividend growth [1] - BTI offers a higher dividend yield of 5.64% compared to PM's 3.26%, making it attractive for income-focused investors despite its lower growth narrative [1] - The valuation gap between PM and BTI reflects differing investment profiles, with PM commanding a premium due to its consistent earnings performance and growth potential [1]

Core Viewpoint - Big tobacco stocks, particularly British American Tobacco and Philip Morris International, are considered attractive investments during economic downturns due to stable demand, strong cash flows, and high dividend yields [1][14]. Company Performance - British American Tobacco and Philip Morris have both seen significant growth in smoke-free products, with British American known for brands like Dunhill and Lucky Strike, while Philip Morris is recognized for Virginia Slims and Marlboro [2]. - British American Tobacco's annual earnings are projected to increase by 5% this year to $4.89 per share, with a further 9% rise expected in FY27 to $5.32 [9]. - Philip Morris is expected to see an 8% increase in top line revenue in FY26, reaching $47.14 billion, with annual earnings projected to spike 12% in FY26 to $8.45 per share, and a further 9% increase in FY27 to $9.27 [10]. Dividend Attractiveness - British American Tobacco has a notable annual dividend yield of 5.62%, while Philip Morris offers a yield of 3.46%, both exceeding the S&P 500 average of 1.11% and the consumer staples sector average of 3.14% [3]. - Both companies maintain strong cash positions, each carrying over $4 billion on their balance sheets [3]. Recent Performance & Valuation - Over the last three years, Philip Morris' stock has increased by over 100%, while British American Tobacco's total return is 96%, both outperforming the S&P 500 and the consumer staples sector [4]. - British American Tobacco trades at 11X forward earnings at $58 per share, while Philip Morris trades at 20X forward earnings at $173 per share, both below the benchmark's 22X forward earnings multiple [5]. Market Outlook - Economic uncertainty, particularly due to geopolitical tensions, has led to increased interest in reliable, high-dividend stocks like British American Tobacco and Philip Morris [14]. - Recent EPS revisions for both companies have been positive, contributing to a Zacks Rank 2 (Buy) rating [14].

Core Viewpoint - British American Tobacco (BAT) is facing a lawsuit from shareholders in London over allegations of failing to disclose breaches of U.S. sanctions related to its operations in North Korea [1] Group 1: Lawsuit Details - More than 100 current and former BAT shareholders filed a lawsuit against the company at London's High Court on February 27, claiming that BAT did not adequately inform the stock market about its business activities in North Korea from 2007 to 2023 [1] - The lawsuit follows BAT's agreement in 2023 to pay over $635 million to U.S. authorities after a subsidiary admitted to violating U.S. sanctions by selling tobacco products to North Korea and committing bank fraud from 2007 to 2017 [1] Group 2: Company Response - BAT has not yet responded to requests for comment regarding the lawsuit [1] - A separate lawsuit was also filed against the company at the High Court on the same day, although details about this lawsuit are not provided [1]

Investment Rating - The industry investment rating is "Buy" [1] Core Insights - The tobacco sector demonstrates both offensive and defensive attributes, with stable earnings growth and high dividends driving stock price increases. The sector benefits from a declining interest rate environment, making high-dividend stocks more attractive [7][22][30] - Tobacco stocks have shown significant excess returns since the Federal Reserve initiated a rate-cutting cycle in September 2024, with British American Tobacco and Philip Morris International achieving cumulative returns of 110% and 96% respectively from January 2024 to February 2026, outperforming the S&P 500 [20][22] - Philip Morris International's growth is driven by regional and product diversification, with its smoke-free products accounting for 41.5% of total net revenue by 2025, effectively offsetting declines in traditional cigarette sales [5][25][26] Summary by Sections Tobacco Sector Analysis - The tobacco sector's defensive characteristics stem from its inelastic demand and strong cash flow, with dividend yields typically ranging from 5% to 7%. This stability attracts investors, especially during periods of declining bond yields [22][30] - Philip Morris International's revenue growth is attributed to its expansion in Asia and Latin America, as well as the introduction of reduced-risk products (RRP) since 2016, which have significantly contributed to its earnings per share (EPS) growth [5][25][26] Domestic Market Focus - The 2026 National Tobacco Work Conference emphasizes the development of a modern tobacco industry system and the promotion of high-quality international business growth. China Tobacco Hong Kong holds exclusive rights in the duty-free cigarette export market, enhancing its value proposition [6][29][30] - The new regulations are expected to optimize the supply chain for cigarette exports to the domestic duty-free market, potentially increasing profit margins for China Tobacco Hong Kong [30][32] Investment Recommendations - The report suggests actively monitoring companies like China Tobacco Hong Kong and Smoore International, which exhibit both growth potential and defensive characteristics in the current market environment [7][30]

Group 1 - British American Tobacco p.l.c. (NYSE:BTI) is considered one of the best undervalued UK stocks to invest in, with mixed ratings from analysts [1][2] - UBS has reiterated a Buy rating on BTI with a price target of £52, while RBC Capital maintains a Sell rating with a price target of £36 [1] - The company reaffirmed its fiscal 2026 guidance, expecting revenue growth towards the lower end of the 3% to 5% range and adjusted profits growth of 4% to 6% [2] Group 2 - For the year ended December 31, 2025, BTI added 4.7 million consumers to its smokeless brands, reaching a total of 34.1 million consumers, with smokeless products now accounting for 18.2% of group revenue, an increase of 70 basis points from fiscal 2024 [3] - Reported group revenue fell by 1.0% to £25,610 million due to a 3.1% currency headwind, but grew by 2.1% at constant FX, driven by combustibles in the US and Americas/Middle East, as well as Velo Plus [3]