Altria & U.S. Tobacco Soars As "Safe Stocks" Post Brexit

Shares of cigarette manufacturer Altria Group Inc. (NYSE:MO) hit a new 52-week high of $68.00 on Jun 24, recording a healthy year-to-date return of 8.33%. The share price of the tobacco maker is rising as investors seek safe haven tobacco sector amid global uncertainties after Britain's exit from the European Union.

Investors are also encouraged by the company’s positive outlook for the year, along with its recent progress in the e-cigarette category.

What’s Behind the Rally?

Tobacco sector seems to be a relatively safe sector for investors at present. Further, the company, with an all American exposure, is insulated from the Brexit turmoil that is rattling the whole of Europe.

Another tobacco stock Reynolds American Inc. (NYSE:RAI) , with a major exposure to America, also gained almost 1% post Brexit. However, shares of Philip Morris International Inc. (NYSE:PM) , which has a significant presence in Europe, slumped after the Brexit episode.

Generally, companies like Altria benefit from the addictive nature of their tobacco products.

In addition, lower gas prices and an improving job scenario have increased consumer spending power, which is doing the trick for these stocks.

Further, Altria’s higher than expected first-quarter earnings on the back of higher pricing and strong performance of the core tobacco business and leading premium brands are also encouraging. Further the company expects its business momentum to continue throughout the year.

Investors are also encouraged by the company’s attempt to strengthen its presence in the growing e-cigarette category. Meanwhile, Altria’s subsidiary, Nu Mark LLC, expanded the distribution of MarkTen XL e-vapor products and Green Smoke e-cigarettes in several leading markets.

Zacks Rank & Another Key Pick

Altria carries a Zacks Rank #2 (Buy). Another favorably ranked stock in the consumer staples sector is Tyson Foods Inc. (NYSE:TSN) with the same Zacks Rank as Altria.