Tobacco.org

A Little Backwardation In Tobacco Stocks Response To Legislation 

Tobacco stocks haven’t responded along the lines that imminent passage of legislation governing the industry would have suggested. Stocks seen best-insulated from the impact of the changes the bill would implement have weakened in the session, while the names with the most exposure have strengthened.

Shares of Altria (MO) have eased nearly 2% in the session, trading down to the $16.50-a-share price, representing the low since early last month. Meanwhile, Lorillad (LO) advanced 2%, and Reynolds American (RAI) gained 1%. . . .

However, Credit Suisse said that Altria remained a ‘’show-me” stock. Investors haven’t been able to accurately assess the company’s ability to grow, because its numbers have been distorted by the federal excise tax introduced in early April. They haven’t gotten much of a view of the integration of the UST smokeless tobacco operations, a business that Altria jumped into in anticipation of this legislation. Meanwhile, Lorillard remained Credit Suisse’s favorite name in the tobacco sector.

Jump to full article »