NEW YORK (AP) — Shares of tobacco companies rose on Monday as an analyst upgraded Altria Group's rating, saying confidence is building that prices will increase next year.
Nik Modi of UBS Investment Research lifted Altria to "Buy" from "Neutral." The analyst said in a client note that there are signs that Altria Group Inc., which sells Marlboro cigarettes, is concentrating more on price realization. These signs include: cutting promotional spending on Marlboro Black and Marlboro NXT in some states; launching Marlboro Southern Blend with a more modest discount than Marlboro Black's launch, and other actions.
Modi recommends both Altria and Lorillard Inc. to investors. Those looking for a higher risk/higher reward stock should opt for Lorillard, as it has more earnings-per-share growth but also faces more risk in the menthol cigarette market. Modi said that Altria has lower exposure to the menthol cigarette market and more modest earnings upside.
Altria's stock added 91 cents, or 2.9 percent, to $32.15 in afternoon trading. The stock has traded between $27 and $36.29 over the last year.
Shares of Lorillard, which makes Newport cigarettes, climbed $3.50, or 3 percent, to $118.78. The stock has traded in a 52-week range of $106.64 to $141.07.
Elsewhere in the sector, shares of Reynolds American Inc., which makes Kool and Camel cigarettes, gained 91 cents, or 2.2 percent, to $41.83. Over the past year, the stock has traded between $38.95 and $46.93.