Tobacco stocks got a boost today from positive reports on the sector from both analysts and journalists.
The sector was pushed into the green today by "some positive press from
Credit Suisse First Boston
and an article from
The Washington Post
," said Bob Basel, the director of listed trading at
Salomon Smith Barney
Dow Jones U.S. Tobacco Index
lately was up 4.1%, and the
American Stock Exchange Tobacco Index
CSFB tobacco analyst Bonnie Herzog wrote about a possible near-term wholesale price increase on cigarettes by
, which makes Marlboro cigarettes. "Investors should not underestimate the strength of the tobacco business," she also said. "Keep in mind, we would expect profitability growth to accelerate for the U.S. tobacco business during 2003."
Philip Morris was gaining 4.2%, bringing its stock price up to $49.96.
( RJR), maker of Camel cigarettes, was rising 5.1% to reach $58.05.
, another cigarette producer, saw the most substantial percentage gains, adding 10.7%, or $3, to $31.
British American Tobacco
was adding a 4.6% to $16.
Herzog said Philip Morris would rise in the near-term mainly based on the "ever-improving litigation and political environment." Improving environment indeed.
The Washington Post
reported this morning that the tobacco companies' political situation may be improving.
The article claimed that the
may soon drop its lawsuit against the tobacco industry. The landmark case -- which charged tobacco producers with racketeering for allegedly making deceptive statements about the addictive and harmful properties of cigarettes -- is a costly government venture. The Bush administration purportedly has not allocated nearly enough funds to continue the legal battle.
About $57.6 million would be required for the lawsuit to continue; the Bush administration reportedly proposed a budget that includes an allocation of only $1.8 million.
Herzog said in a phone interview that the possibility of the Bush administration moving to end the litigation is somewhat expected. "It's not a huge surprise, but we finally get some clarification," she said.
The possibility of the massive litigation coming to an end -- and a positive end, at that, for the tobacco companies -- pushed those stocks higher.
In general, tobacco stocks have been outperforming the market. Philip Morris rose more than 130% in the past year, while RJ Reynolds soared a massive 211%. So an up day is nothing new to these companies, but the recent news helped them to move even higher than usual.