Altria Group, Inc. (NYSE:MO) turned off its international operations in 2008, which now trades as a separate tobacco company, Philip Morris International Inc. (NYSE:PM). Altria fixes on the U.S. market, while Philip Morris is focused on international tobacco markets. Although Altria is considered the more firm company, with less growth occasions, it has identified various opportunities within the U.S. that extend beyond tobacco. This includes its approximately 30% stake in the fiction company, SAB Miller.
Although the cigarette maker as a whole is expected to see mid-single drop over the next few years, Altria is expected to see a income hike of 5% in 2012. This is driven by a diverse product mix and initiatives for restructuring manufacturing, where they expect to save $400 million by the end of 2013.
Altria is the U.S. leader in tobacco sales market share at 50%, with Reynolds American, Inc. (NYSE:RAI) coming in at second approximately 30%. Reynolds is expected to have a down year, with incomes down 1% from 2011. The company is planning to keep revenues relatively in line due growth in its top smoking brands, Camel and American Spirits, but other lower margin brands continue to struggle. Part of what gives Altria an advantage over Reynolds, is that Reynolds’ top brands are susceptible to trade down.
The third big player in the U.S. cigarette company is Lorillard Inc. (NYSE:LO), with almost 10% of the tobacco market. Lorillard saw cigarettes sales up 10% in 2011 and expects sales up 4% in 2012 on tobacco market share gains thanks to the company’s top brand Newport. However, if the FDA’s ban of menthol ever came to fruition, it would be bad to Lorillard.