Altria vs. Philip Morris: Which Tobacco Stock Is a Better Buy Now?

Core Viewpoint - Altria Group, Inc. and Philip Morris International Inc. are two leading players in the tobacco industry, with diverging strategies as they transition from traditional tobacco to reduced-risk products (RRPs) [1][2]. Altria Group, Inc. - Altria commands over 40% of the U.S. cigarette market, but faces declining cigarette volumes and reduced pricing power, with net revenues from smokeable products falling 5.8% to $4,622 million in Q1 2025 [5][6]. - The company is focusing on building a smoke-free portfolio, particularly in modern oral nicotine and vapor products, with its on! nicotine pouch seeing an 18% year-over-year growth in shipment volumes [6][7]. - Altria's e-vapor efforts have faced challenges, including the removal of NJOY ACE from the market due to regulatory issues, but the company aims to innovate and develop compliant vapor products [7][8]. - Operating solely in the U.S. presents both advantages and challenges, as regulatory pressures increase, limiting innovation and complicating execution [8]. Philip Morris International Inc. - Philip Morris is leading the global shift towards a smoke-free future, with its IQOS heat-not-burn device gaining traction in markets like Japan and Europe [9][10]. - The company has strengthened its smoke-free product portfolio through the acquisition of Swedish Match, enhancing its position in the oral nicotine segment [10][11]. - In Q1 2025, smoke-free products contributed 42% of total revenues and 44% of gross profit, with a 15% year-over-year revenue increase [11]. - Philip Morris benefits from a global footprint, allowing for better regulatory risk diversification and broader growth opportunities compared to Altria [12]. Financial Performance and Valuation - The Zacks Consensus Estimate for Philip Morris' 2025 EPS has increased by 3.3% to $7.47, indicating a projected growth of 13.7%, while Altria's estimate has risen by 1.3% to $5.35, reflecting a growth of 4.5% [13]. - Philip Morris trades at a forward P/E of 22.20x, while Altria trades at 10.97x, indicating that investors are willing to pay a premium for Philip Morris' growth visibility [14]. - Over the past year, Philip Morris' stock has gained 73.9%, outperforming Altria's 29.6% and the industry's 54.5%, showcasing investor confidence in its growth strategy [16]. Conclusion - Philip Morris stands out with its successful transition to RRPs, global diversification, and stronger earnings growth outlook, while Altria's U.S. market dominance is tempered by regulatory challenges and a slower transition to RRPs [17].