Altria Group Inc (MO), Lorillard Inc. (LO): Is This Tobacco Company Still Smoking Hot?

Growth

Despite the decline in the number of people who smoke in the U.S, Altria Group Inc (NYSE:MO) was able to present moderate revenue growth of almost 3.5% during 2012 compared to 2011. Other leading tobacco companies have a lower growth rate, and Reynolds’ revenues declined by almost 2.8% during 2012. The chart below shows the revenue growth of these tobacco companies.

Lawsuits

When you talk about tobacco companies you have to say something about the lawsuits these companies face; they are among the main risk factors when holding a tobacco company. As of 2011, Altria had more than 120 pending cases, including 82 individual smoking and health cases (according to the company’s 2011 annual report). But after the big settlement between tobacco companies and the States from back in 1998, the uncertainty around Altria’s future was reduced substantially.

Altria Group Inc (NYSE:MO), much like other tobacco companies, will continue to have the threat of lawsuits over their head. But as long as tobacco companies continue paying the $206 billion settlement (up to now the companies have paid $85 billion), tobacco companies won’t go anywhere.

Bottom Line

Altria doesn’t have the strongest numbers compared to other leading tobacco companies in terms of dividend or profit margins. But the company maintains its high market share and continues to grow at a faster pace than its competitors. This is likely to keep it an attractive investment.

The article Is This Tobacco Company Still Smoking Hot? originally appeared on Fool.com and is written by Lior Cohen.

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