Since Altria Group spun-off Kraft it seems like their shares have not been getting any momentum. This wasn't helped much either after CEO Camilleri stated in late April that the decision to spin off Phillip Morris International was a "decision for the next 50 years,'' not ``the next 50 days or the next five years,''. Conversely, he did hint that the company will "consider" separating the international and U.S. tobacco units over the next several months.
News also came that MO's market test for their Taboka smokeless tobacco hasn't been doing too well. Random sampled retailers and convenience stores say that sales were weak and there was very little need to restock inventory. Some other retailers even discontinued carrying the product. In my previous posts, although the smokeless tobacco market is small in size compared to cigarettes, it remains one of the few growing segments in the U.S. tobacco industry, increasing volumes by a 6% CAGR over the past 5 years. Currently, it's dominated almost 95% exclusively to UST, Conwood/Reynolds American, and Swedish Match - so competition will be intense.
In my opinion, I don't think the poor test performance is discouraging, in fact what's most likely to happen is MO will either introduce smokeless products with their already recognized names like Marlboro, or it will end up buying out UST or Swedish Match, both that already have the established presence in the market. If the latter is to happen, it sure won't be until after PM International is gone.
In any means, my target price still remains close to $80 for the coming year.