Altria offsets lower demand by hiking prices
Cigarette sales by subsidiary Philip Morris underpin profitability, stock price.
Cigarette manufacturers across the country have continued to raise prices as they adjust to shrinking demand. Reynolds American (RAI) is also raising prices by 5 cents per pack, while Lorillard (LO) will increase prices by 6 cents per pack.
Even though the state excise taxes have risen only 3% this quarter compared to 8% last year, this hasn't stopped the big three tobacco companies -- Altria, Reynolds American and Lorillard -- from raising prices. The big three continue to command strong pricing power, and we expect the profit margins to increase even though cigarettes sales are expected to decline. This is Altria's second price increase for the year, and it raised prices twice in the previous year as well.
Altria's stock price has increased by about 20% this year as investors continue to be optimistic about the company and the overall tobacco industry. We expect Altria's profit margins on cigarettes to increase from 39% currently to 43% by 2014.
The move will see improved margins for retailers, especially to those that are part of Marlboro Leadership Price (MLP) program. The MLP program was first started in April and offers $2 per Marlboro carton in exchange for maintaining a price no higher than the designated MLP.
By our estimates, cigarettes constitute 73% of Altria's stock price, so any change in the cigarette profitability will also have a significant impact on the overall stock price. We have a $31 price estimate for Altria, which is about 10% above the market price.
This is going to be a Major problem in the future.
When everyone either quits smoking or dies then how is the government going to replace the revenue?
What are they going to start taxing higher next?
Milk, bread, water, gas housing or any of the other items that we depend on. That's where.
I'll never defend smoking, it's a horrible habit, but one day the American public will be sorry for taxing it out of existence.
Being forewarned is being prepared and sooner or later we will all realize that the only thing we mean to big business is profit. But by then it will be too late!!!!
Even though I have quit smoking using a electronic cigarette, I still respect the personal rights of people who choose to smoke. Believe me, I understand the frustration of being lectured by self-righteous non-smokers. Quitting or not quitting is a personal decision that one must reach on their own. No amount of chiding by others ever got anyone to quit, and neither will the increasing price of cigarettes.
There are just three groups of people that it still seems to be OK to beat up on in this country: People of faith, fat people, and smokers. Cigarettes are not illegal, yet.
The tobacco companies have to pay the states every year as part of the settlement to the lawsuits the states filed. The problem for the states is that the amount they get is determined by the number of cigarettes that are sold in that state. If fewer cigarettes are being sold that means the states get less money.
This will be a problem because some states already spent the money and planned on repaying it with the money they get from the tobacco companies, this means that states, which are already having budget shortfalls, will face a new problem that they’ll have to deal with.
The tobacco companies will collect higher profits while the states struggle.
so lets say we wipe out smoking, now everyone lives until 100....but they quit working at 67, any healthcare cost saved has been wiped away 10000X...puff, puff
All us smoker ask is let us have our places, bars, casinos........you can have the rest
I have to agree with the first two posters. The best thing to ever come along to help quit smoking are electronic cigarettes. Now if we can just keep the FDA out of it....
After smoking for 37 years, I purchased and electronic cigarette a year and a half ago, and have not smoked a regular cigarette since. I'm sure most people know that it's not the nicotine that kills you, it's the burning tobacco. Electronic cigarettes create no heat or smoke, but mimic the behavior of smoking, which was the hardest thing for me to give up as an ex-smoker.
Electronic cigarettes are not promoted as quit-smoking devices or regulated by the FDA. The FDA has a vested interest in keeping people smoking. They benefit from both the sale of cigarettes, and the sale of stop-smoking drugs, some of which make people suicidal.
Obama and his commie-symp ilk need to be removed from office and placed in nice, safe jail cells for their treasonous antics.
Secondly, why should you do-gooders point fingers at smokers? Should we not be focusing on larger environmental issues? How about car pollution or dependencing on oil? All of which contributes to more pollution then smokers holding a cigarette. Why do you feel the need to make nasty comments about others when your driving around in your SUV, or other gas guzzling car? Perhaps smokers will quit smoking when you buy a Schwinn. You see, smokers arent hypocrites. They know what they do isnt healthy, they acknowledge it, they often remove themselves from groups to go do their nasty habit - but not do-gooder hypocrites. Remember, when you hold out your pointed finger, you have 4 pointing right back at you.
If you want to smoke...its YOUR choice....I have smoked, quit (3 yrs. 1 time, 1yr another time) and currently smoke....
Its B.S. how "some" non-smokers get SO high n mighty, wanting to dictate to others about smoking;....my fav, was few yrs ago...
I was on a "smoke break" at work....and these 2 woman walked by (this was at an outdoor mall in the south) and one turned to the other and said "This place is communist....look how everybody smokes, it should be banned!"....and I replied "Honey,....you have the choice to smoke, if it was banned OR mandatory...that would be like communism!....then blew a nice smoke right her way...LOL!"
Do you people honestly believe that all the taxes received on cigarettes sales goes to health care costs? Get real. What about the taxes that the cigarette companies pay to be in business? What about the taxes their employees pay not only in payroll taxes, but on the things they purchase? How many of them will still have jobs if everyone quits smoking?
I quit because I wanted to, but I've made it a point to NOT become one of those "reformed smokers" that everyone hates. Smoking is a choice.
It amazes me to hear how sanctimonious some people are.
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