Market Overview

FDA Nicotine Crack-Down Will Take Several Years Before 'Any Tangible Regulatory Change' Takes Hold, Analyst Says

Share:
FDA Nicotine Crack-Down Will Take Several Years Before 'Any Tangible Regulatory Change' Takes Hold, Analyst Says

The U.S. Food and Drug Administration's policy shift on tobacco and nicotine regulation initially resulted in a 20-percent plunge in Altria Group Inc (NYSE: MO), the parent company of notable cigarette brands including Philip Morris.

Needless to say, the FDA's crackdown on nicotine products is a negative event for the industry as a whole. However, this doesn't spell the end for tobacco companies, analysts at UBS suggested in a research report. The firm's Stephen Powers maintains a Neutral rating on Altria's stock rating with a price target lowered from $78 to $72 as the regulatory change could result in "modest potential negatives."

In fact, the FDA's new policy on tobacco is the "bigger overhang" as it could evolve into incremental federal cigarette regulation — an event that was previously viewed as being unlikely, the analyst continued. As a result, Altria's longer-term growth assumptions are being called into question and a re-rating of the stock's multiple is justified, as has been the case in prior periods of regulatory scrutiny.

However, the FDA's new policy shift will be slow to implement and represents no near-term impacts to Altria's earnings per share, Powers added. Also, conversations with industry experts suggest that it will take several years before any tangible regulatory change on the industry takes hold.

Related Links:

Tobacco Reemerges As Hollywood Star, But Does The Screen Time Help?

This Biometric ID System Allows You To Buy Weed, Booze And Other Controlled Products From A Vending Machine

Posted-In: cigarettesAnalyst Color Price Target FDA Legal Top Stories Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (MO)

View Comments and Join the Discussion!