The Food and Drug Administration is set on introducing restrictions on the sale of electronic cigarettes, including prohibiting
most flavored products in convenience stores and gas stations,
The Washington Post reported Nov. 8. The Wall Street Journal followed up with its own report Friday that said the FDA could
propose a ban on menthol cigarettes.
Height Securities' Stefanie Miller and Wells Fargo's Bonnie Herzog commented on recent
media reports in separate research reports.
Height Says Concerns Overblown
The FDA has the authority to regulate tobacco products from the Tobacco
Control Act of 2009, Miller said in a note.
The FDA could ban flavors of tobacco products, including menthol, but the Act doesn't allow the FDA to tobacco products
immediately, according to Height.
A ban on menthol or other tobacco products is unlikely to occur before 2022, and the tobacco industry would likely slow
down the enaction of any ban through litigation, Miller said.
Nevertheless, last week's reports are "unwelcome news" for cigarette companies like British American Tobacco
PLC (NYSE: BTI), Imperial Tobacco Group
plc (OTC: IMBBY) and Altria Group
Inc (NYSE: MO), according to Height.
Wells Fargo: Who's At Risk?
Wells Fargo's position on menthol is that science doesn't support a point of view that menthol cigarettes are more harmful than
non-menthol, Herzog said in a note.
Given the FDA's position that it will follow a science-based approach, it is unlikely the regulatory body will outright ban
menthol — although a proposal to restrict or lower the levels of menthol is reasonable, the analyst said.
Menthol cigarettes account for around 35 percent of total industry volume in the U.S., Herzog said. British American
Tobacco's Reynolds brand is the largest in the menthol segment, as 55 percent of its volume in the U.S. is menthol, she said.
Approximately 21 percent of Altria's volume is menthol and it accounts for around 18 percent of total profit, while about 20
percent of Imperial Tobacco's volume is menthol, the analyst said.
Price Action
British American Tobacco shares were down nearly 3 percent at $36.95 at the time of publication Tuesday, while Altria was down
1.4 percent at $60.34 and Imperial Tobacco was down 1.89 percent at $33.96. Philip Morris (NYSE: PM) was down about 1.5 percent.
Related Links:
Bernstein
Initiates On Tobacco Stocks: Philip Morris 'Leads The Way In The New Nicotine World'
Marlboro
Maker Altria May Be In Talks With Cannabis Producer Aphria About A Minority Stake
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.