NEW YORK (AP) — The lack of any significant amendments to a pending report on menthol cigarettes bodes well for tobacco companies, according to one analyst, who said that it reduces the chances that a harsher federal crackdown is on the way.
Reynolds American, Inc. Headquarters – Winston-Salem, NC.
In March, a Food and Drug Administration advisory panel said that removing menthol cigarettes from the market would benefit public health because the minty flavoring has led to an increase in smokers and that it also makes quitting more difficult. The Tobacco Products Scientific Advisory Committee stopped short of recommending an outright ban. The advisers said at the time that the FDA should consider other factors, including that a ban could increase counterfeit and smuggled cigarettes.
Panels like the tobacco committee advise the FDA on scientific issues. The agency doesn’t have to follow their recommendations, but often does.
A menthol ban or other restrictions on the flavored cigarettes would fall heavily on Lorillard Inc., whose Newport brand is the top-selling menthol cigarette in the U.S.
Lorillard, the third-largest U.S. tobacco company, is based in Greensboro, N.C. The company spun off from Loews Corp. in 2008.
Altria Group Inc building
Citi Investment Research’s Vivien Azer said in a client note that Lorillard’s stock sold off 16 percent earlier this month when it was announced that changes would be made to the original report. But Azer said an FDA official told the Tobacco E-News that the changes don’t affect the report’s conclusions or recommendation.
Because the changes are likely insignificant, Azer said it lessens worries that new amendments might be made or a stricter recommendation would occur.
The analyst maintained Lorillard’s “Buy” rating and kept a $122 target price. Its stock dropped $1.76 to $111.83 in morning trading on Wednesday.
Elsewhere in the sector, shares of Reynolds American Inc., which is based in Winston-Salem, N.C. and makes Camel cigarettes, shed 41 cents to $37.94.
Shares of Altria Group Inc. fell 12 cents to $27.25. Altria is the owner of the biggest U.S. cigarette maker, Marlboro maker Philip Morris USA. The company is based in Richmond, Va.
