Tobacco Sector Slumps After Philip Morris Slashes FY14 Outlook

Shares in tobacco stocks fell Thursday after Philip Morris International Inc.

lowered its fiscal 2014 earnings outlook by more than 4 percent. Philip Morris Chief Executive André Calantzopoulos further warned that discounting in Australia could result in results "at the lower end" of expectations now calling for $4.87 to $4.97 a share for 2014 earnings. Wall Street was looking for $5.25, and as recently at May 7, the company forecast earnings of $5.09 to $5.19 a share. The new outlook suggests earnings growth of 6 percent to 8 percent over 2013 results of $5.40 a share. Calantzopoulos blamed currency headwinds, an improving but weak economic environment in Europe and "known challenges" in Asia. Separately, Nielsen data suggest that Italian cigarette retail volume fell 1.2 percent in May following a gain of 2.2 percent in April, according to Bank of America analyst Lisa K. Lewandowski. Philip Morris shares tumbled nearly 3 percent to $86.51. Competitors caught in the downdraft included Reynolds American Inc.

down more than 1 percent at $49.97 and British American Tobacco PLC

also down more than 1 percent at $118.53. Imperial Tobacco Group PLC

fell 1.2 percent to $88.72 and Altria Group Inc.

was off 0.88 percent at $41.67.