Cigarettes Companies Think FDA Packaging Requirements are Unconstitutional

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(List compiled by Rebecca Lipman. Data sourced from Finviz.)

The US Food and Drug Administration is facing a lawsuit for requiring graphic label warnings on cigarette boxes.

Reynolds American (RAI), Liggett Group, Lorillard (LO), and Commonwealth Brand, all plaintiffs in the lawsuit, insist the new regulations to emblazon images of decaying bodies and rotted teeth on their products are unconstitutional under the first amendment's right to free speech.

The images, they argue, serve as advertisements for the government, forcing them to participate in a campaign they do not endorse.

And quite a campaign it is: "The 2009 Family Smoking Prevention and Tobacco Control Act requires color warnings covering the top half of the front and back panels of cigarette packages, and the top 20 percent of printed advertising." (via CNBC)

The litigation is still pending. If the tobacco companies should fail in their endeavor, the new labels will be in effect by September of 2012.

Interested in how cigarette company stocks are reacting to the news?

So far so good, all have gained market value in the last week. Take a look at the list of cigarette companies and relevant data below. All companies have market caps over $300M.

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1. Philip Morris International, Inc. (PM): Cigarettes Industry. Market cap of $121.30B. The stock has had a couple of great days, gaining 6.41% over the last week. Philip Morris International is the leading international tobacco company, with products sold in over 160 countries. They own 7 of the top 15 brands in the world and have a strong mix of international and local products. The company is not involved in the lawsuit.

2. British American Tobacco plc (BTI): Cigarettes Industry. Market cap of $90.09B. The stock has had a couple of great days, gaining 8.38% over the last week. British American Tobacco is the holding company of a group of companies which manufacture, market and sell tobacco products. This includes Dunhill, Kent, Lucky Strike and Pall Mall. The company is not involved in the lawsuit.

3. Altria Group Inc. (MO): Cigarettes Industry. Market cap of $53.85B. The stock has had a couple of great days, gaining 6.73% over the last week. Altria Group is the parent company of Philip Morris USA, U.S. Smokeless Tobacco Company, John Middleton, Ste. Michelle Wine Estates and Philip Morris Capital Corporation. Their tobacco company brand portfolios consist of successful and well-known brand names such as Marlboro, Copenhagen, Skoal and Black & Mild. The company is not involved in the lawsuit

4. Reynolds American Inc. (RAI): Cigarettes Industry. Market cap of $20.61B. The stock has had a couple of great days, gaining 7.77% over the last week. R.J. Reynolds Tobacco Company, the second- largest U.S. tobacco company, manufactures about one of every three cigarettes sold in the United States, including five of the nation's 10 best-selling brands: Camel, Winston, KOOL, Salem and Doral. Santa Fe Natural Tobacco Company, Inc. manufactures Natural American Spirit cigarettes. This company is one of the plaintiffs in the lawsuit against the U.S. FDA.

5. Lorillard, Inc. (LO): Cigarettes Industry. Market cap of $15.0B. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 4.8%, current ratio at 1.75, and quick ratio at 1.48. The stock is a short squeeze candidate, with a short float at 7.4% (equivalent to 5.08 days of average volume). The stock has had a couple of great days, gaining 8.64% over the last week. Lorillard is the oldest continuously operating tobacco company in the U.S. Newport, Lorillard's flagship brand, is a menthol-flavored premium cigarette brand and the top selling menthol and second largest selling cigarette in the U.S. In addition to Newport, the Lorillard product line has five additional brand families marketed under the Kent?, True?, Maverick?, Old Gold? and Max? brand names. This company is one of the plaintiffs in the lawsuit against the U.S. FDA.

6. Vector Group Ltd. (VGR): Cigarettes Industry. Market cap of $1.42B. The stock is a short squeeze candidate, with a short float at 7.46% (equivalent to 12.43 days of average volume). The stock has had a couple of great days, gaining 5.98% over the last week. Liggett engages in the manufacture and sale of cigarettes in the United States. Liggett produces cigarettes in approximately 160 combinations of length, style and packaging. The company also engages in real estate business. The company is not involved in the lawsuit.

7. Star Scientific, Inc. (CIGX): Cigarettes Industry. Market cap of $433.54M. The stock is a short squeeze candidate, with a short float at 15.44% (equivalent to 6.55 days of average volume). The stock has had a couple of great days, gaining 6.29% over the last week. The stock has performed poorly over the last month, losing 27.7%. Star Scientific, Inc., a technology-oriented tobacco company, engages in the development, implementation, and licensing of proprietary technology for the curing of tobacco so as to prevent the formation of carcinogenic toxins present in tobacco and tobacco smoke, primarily the tobacco-specific nitrosamines (TSNAs). The company is not involved in the lawsuit.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: BTI , CIGX , LO , MO , PM , RAI , VGR

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