FDA's Nicotine Strategy Has Limited Impact on Tobacco; Pullback Reflects Frothy Valuations
We are fairly sanguine about the impact on tobacco manufacturers' long-term cash flows from the U.S. Food and Drug Administration's announcement that it intends to lower levels of nicotine in cigarettes, and we maintain our wide moat ratings and fair value estimates. Such measures are likely to accelerate the migration of smokers to substitute products, and we expect Big Tobacco to continue dominating the industry. Although we do not believe the valuations of Altria and BAT have been impaired by...British American Tobacco is engaged in tobacco and nicotine products. This includes Co.'s Next Generation Products, comprising its vapour and tobacco heating products, and its oral tobacco and nicotine products such as moist snuff and snus. Co.'s U.S business (Reynolds American) brand portfolio which includes Newport, Camel and Pall Mall. These, and other brands including Doral, Misty and Capri, are manufactured in a variety of styles and marketed throughout the U.S. Co. has other international and local cigarette brands including Vogue, Viceroy, Kool, Peter Stuyvesant, Craven A, Benson & Hedges, John Player Gold Leaf, State Express 555 and Shuang Xi.
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