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3 Tobacco Stocks to Keep an Eye on Amid Industry Challenges
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The Zacks Tobacco industry is facing mounting challenges, including declining cigarette sales – resulting from shifting consumer preferences, inflationary pressures and tightening regulations. Rising health awareness and stricter restrictions on smoking are reducing demand for traditional tobacco products, weighing on the overall industry performance.
Despite these headwinds, companies such as Philip Morris International Inc. ((PM - Free Report) ), Altria Group, Inc. ((MO - Free Report) ) and Turning Point Brands, Inc. ((TPB - Free Report) ) are well-positioned, courtesy of their focus on and smoke-free innovations to capture growing demand for healthier nicotine alternatives.
About the Industry
The Zacks Tobacco industry includes companies that manufacture and sell cigarettes as well as tobacco and nicotine-based products, such as cigars, snuffs and oral tobacco. Some companies also offer RRPs, such as e-cigarettes, vaping and heat-not-burn variants. A few of the firms are engaged in making devices and attachments needed in vaping and heat-not-burn products. Most products manufactured by the tobacco industry participants fall under the strict vigilance of the U.S. Food and Drug Administration and are required to follow the permissible levels of nicotine in manufacturing. Players in this space sell products mostly through large retailers, distributors, convenience stores, drugstores, wholesalers and grocery chains. Some international tobacco firms also operate in the country through subsidiaries.
3 Trends Shaping the Future of the Tobacco Industry
Challenges in Cigarette Sales Volumes: The tobacco industry is confronting significant headwinds in cigarette sales, driven by persistent inflation and broader economic pressures that have reshaped consumer spending patterns. Rising costs, coupled with a growing shift toward smoke-free alternatives, are contributing to declining cigarette consumption. Additionally, regulatory restrictions on sales, advertising and manufacturing, prompted by health concerns over nicotine, are further weighing on volumes. Given that traditional cigarettes remain a major revenue source for tobacco companies, the continued decline in sales presents a notable challenge for the industry.
Escalated Costs: Numerous industry participants have been affected by cost inflation. Global inflationary challenges linked to essential materials such as tobacco leaf, energy and labor costs have been concerns. Elevated expenses related to the research, development and marketplace activities of smoke-free products further present risks to profit margins.
Rising Popularity of Smoke-Free Options: The growing popularity of smoke-free alternatives, such as heated tobacco, vapor products and oral nicotine, is reshaping the tobacco industry. Rising health awareness and stricter smoking regulations are prompting consumers to seek safer, more modern options for nicotine consumption. These reduced-risk products (RRPs), marketed as safe due to their innovative formulations and alternative consumption methods, are gaining popularity as consumers seek healthier options and smoking cessation solutions. Major tobacco companies are investing heavily in expanding their presence in this category, focusing on innovations that improve user experience and energy efficiency. As a result, the tobacco industry has seen significant revenue growth from RRPs and smoke-free products, with continued demand expected to fuel positive growth and transformation within the industry.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Tobacco industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #165, which places it in the bottom 32% of more than 243 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates drab near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Since the beginning of August 2025, the industry’s consensus estimate for current financial year earnings has decreased 1.2%.
Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
The Zacks Tobacco industry has outperformed the Zacks S&P 500 composite and the broader Zacks Consumer Staple sector over the past year.
The industry has gained 36.4% over this period against the S&P 500’s growth of 18.4%. Meanwhile, the broader sector has declined 6.4%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing consumer staple stocks, the industry is currently trading at 14.44X compared with the S&P 500’s 23.53X and the sector’s 16.37X.
Over the past five years, the industry has traded as high as 15.43X, as low as 9.03X and at the median of 11.09X, as the chart below shows.
Price-to-Earnings Ratio (Past Five Years)
3 Tobacco Stocks Worth Considering
Philip Morris International: The Zacks Rank #3 (Hold) company is undergoing a transformative shift from traditional cigarettes toward a smoke-free future. The company has established itself as a global leader in RRPs through innovation, strategic acquisitions and strong pricing power, accelerating this transition. Flagship smoke-free offerings such as IQOS and ZYN are gaining significant market traction, enabling Philip Morris to actively reshape its product portfolio in line with evolving consumer preferences and global health trends. This strategic evolution reinforces the company’s commitment to a more sustainable and healthier future while supporting resilient financial performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for PM’s current financial year earnings per share (EPS) has remained unchanged in the past 30 days at $7.50. Shares of Philip Morris have gained 30% in the past year.
Price and Consensus: PM
Altria Group: This Zacks Rank #3 company is making significant strides in its transformation toward a smoke-free future. By prioritizing RRPs, driving innovation and ensuring regulatory compliance, Altria is reshaping its business model for long-term sustainability. A central element of this transition is its fast-growing oral nicotine pouch brand, on!, which continues to gain market share and drive growth. Through its “Optimize and Accelerate” initiative, Altria is streamlining operations, enhancing efficiency, and leveraging strong pricing power to support profitability. Bolstered by the enduring strength of legacy brands like Marlboro and its expanding smoke-free portfolio, Altria is well-positioned for continued success in the evolving tobacco landscape.
The Zacks Consensus Estimate for MO’s current financial year earnings per share (EPS) has remained unchanged in the past 30 days at $5.43. Shares of Altria have surged 31.7% in the past year.
Price and Consensus: MO
Turning Point Brands: This Zacks Rank #3 company is gaining momentum as a leading manufacturer, marketer, and distributor of branded consumer tobacco and alternative smoking products. Flagship brands such as Zig-Zag and Stoker’s are driving growth through innovative product launches and expanded distribution channels. Its modern oral nicotine offerings are also experiencing strong consumer and retail demand, reflecting the rising popularity of smokeless alternatives. Turning Point is leveraging its well-established sales network and strategic partnerships to boost retail visibility and cross-sell its portfolio. With a focus on innovation, brand building, and customer engagement, TPB is well-positioned to capture greater market share in the evolving RRPs segment.
The Zacks Consensus Estimate for TPB’s current financial year EPS has remained unchanged at $3.41 over the past 30 days. Turning Point Brands' shares have skyrocketed 105.8% in the past year.
Price and Consensus: TPB
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3 Tobacco Stocks to Keep an Eye on Amid Industry Challenges
The Zacks Tobacco industry is facing mounting challenges, including declining cigarette sales – resulting from shifting consumer preferences, inflationary pressures and tightening regulations. Rising health awareness and stricter restrictions on smoking are reducing demand for traditional tobacco products, weighing on the overall industry performance.
Despite these headwinds, companies such as Philip Morris International Inc. ((PM - Free Report) ), Altria Group, Inc. ((MO - Free Report) ) and Turning Point Brands, Inc. ((TPB - Free Report) ) are well-positioned, courtesy of their focus on and smoke-free innovations to capture growing demand for healthier nicotine alternatives.
About the Industry
The Zacks Tobacco industry includes companies that manufacture and sell cigarettes as well as tobacco and nicotine-based products, such as cigars, snuffs and oral tobacco. Some companies also offer RRPs, such as e-cigarettes, vaping and heat-not-burn variants. A few of the firms are engaged in making devices and attachments needed in vaping and heat-not-burn products. Most products manufactured by the tobacco industry participants fall under the strict vigilance of the U.S. Food and Drug Administration and are required to follow the permissible levels of nicotine in manufacturing. Players in this space sell products mostly through large retailers, distributors, convenience stores, drugstores, wholesalers and grocery chains. Some international tobacco firms also operate in the country through subsidiaries.
3 Trends Shaping the Future of the Tobacco Industry
Challenges in Cigarette Sales Volumes: The tobacco industry is confronting significant headwinds in cigarette sales, driven by persistent inflation and broader economic pressures that have reshaped consumer spending patterns. Rising costs, coupled with a growing shift toward smoke-free alternatives, are contributing to declining cigarette consumption. Additionally, regulatory restrictions on sales, advertising and manufacturing, prompted by health concerns over nicotine, are further weighing on volumes. Given that traditional cigarettes remain a major revenue source for tobacco companies, the continued decline in sales presents a notable challenge for the industry.
Escalated Costs: Numerous industry participants have been affected by cost inflation. Global inflationary challenges linked to essential materials such as tobacco leaf, energy and labor costs have been concerns. Elevated expenses related to the research, development and marketplace activities of smoke-free products further present risks to profit margins.
Rising Popularity of Smoke-Free Options: The growing popularity of smoke-free alternatives, such as heated tobacco, vapor products and oral nicotine, is reshaping the tobacco industry. Rising health awareness and stricter smoking regulations are prompting consumers to seek safer, more modern options for nicotine consumption. These reduced-risk products (RRPs), marketed as safe due to their innovative formulations and alternative consumption methods, are gaining popularity as consumers seek healthier options and smoking cessation solutions. Major tobacco companies are investing heavily in expanding their presence in this category, focusing on innovations that improve user experience and energy efficiency. As a result, the tobacco industry has seen significant revenue growth from RRPs and smoke-free products, with continued demand expected to fuel positive growth and transformation within the industry.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Tobacco industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #165, which places it in the bottom 32% of more than 243 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates drab near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Since the beginning of August 2025, the industry’s consensus estimate for current financial year earnings has decreased 1.2%.
Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
The Zacks Tobacco industry has outperformed the Zacks S&P 500 composite and the broader Zacks Consumer Staple sector over the past year.
The industry has gained 36.4% over this period against the S&P 500’s growth of 18.4%. Meanwhile, the broader sector has declined 6.4%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing consumer staple stocks, the industry is currently trading at 14.44X compared with the S&P 500’s 23.53X and the sector’s 16.37X.
Over the past five years, the industry has traded as high as 15.43X, as low as 9.03X and at the median of 11.09X, as the chart below shows.
Price-to-Earnings Ratio (Past Five Years)
3 Tobacco Stocks Worth Considering
Philip Morris International: The Zacks Rank #3 (Hold) company is undergoing a transformative shift from traditional cigarettes toward a smoke-free future. The company has established itself as a global leader in RRPs through innovation, strategic acquisitions and strong pricing power, accelerating this transition. Flagship smoke-free offerings such as IQOS and ZYN are gaining significant market traction, enabling Philip Morris to actively reshape its product portfolio in line with evolving consumer preferences and global health trends. This strategic evolution reinforces the company’s commitment to a more sustainable and healthier future while supporting resilient financial performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for PM’s current financial year earnings per share (EPS) has remained unchanged in the past 30 days at $7.50. Shares of Philip Morris have gained 30% in the past year.
Price and Consensus: PM
Altria Group: This Zacks Rank #3 company is making significant strides in its transformation toward a smoke-free future. By prioritizing RRPs, driving innovation and ensuring regulatory compliance, Altria is reshaping its business model for long-term sustainability. A central element of this transition is its fast-growing oral nicotine pouch brand, on!, which continues to gain market share and drive growth. Through its “Optimize and Accelerate” initiative, Altria is streamlining operations, enhancing efficiency, and leveraging strong pricing power to support profitability. Bolstered by the enduring strength of legacy brands like Marlboro and its expanding smoke-free portfolio, Altria is well-positioned for continued success in the evolving tobacco landscape.
The Zacks Consensus Estimate for MO’s current financial year earnings per share (EPS) has remained unchanged in the past 30 days at $5.43. Shares of Altria have surged 31.7% in the past year.
Price and Consensus: MO
Turning Point Brands: This Zacks Rank #3 company is gaining momentum as a leading manufacturer, marketer, and distributor of branded consumer tobacco and alternative smoking products. Flagship brands such as Zig-Zag and Stoker’s are driving growth through innovative product launches and expanded distribution channels. Its modern oral nicotine offerings are also experiencing strong consumer and retail demand, reflecting the rising popularity of smokeless alternatives. Turning Point is leveraging its well-established sales network and strategic partnerships to boost retail visibility and cross-sell its portfolio. With a focus on innovation, brand building, and customer engagement, TPB is well-positioned to capture greater market share in the evolving RRPs segment.
The Zacks Consensus Estimate for TPB’s current financial year EPS has remained unchanged at $3.41 over the past 30 days. Turning Point Brands' shares have skyrocketed 105.8% in the past year.
Price and Consensus: TPB