Consumer Stocks Falling in Late Trade; Lorillard, Reynolds Pause As Buyout Speculation Eases


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Consumer stocks were ending moderately lower Wednesday with shares of consumer staples companies in the S&P 500 about falling about 0.1%. Shares of consumer discretionary firms in the S&P 500 were down 0.4%.

In company news, shares of Lorillard Inc. ( LO ) declined Wednesday, falling for a second day following an 8% gain earlier this month amid speculation Reynolds American ( RAI ) may be positioning itself for buyout of the rival cigarette-maker.

The Financial Times last week reported RAI had hired Lazard to assist with a potential LO buyout, suggesting a $20 billion pricetag was possible. But analysts at Citigroup earlier this week threw some cold water on that speculation, saying a deal was unlikely because of prospective anti-trust concerns.

Wells Fargo Securities analyst Bonnie Herzog suggests RA could eventually offer as much as $80 a share offer, provided they are able to find sufficient cost-savings in the combined companies.

She sees synergies could generate around $400 million in cost savings - equal to 8% of LO revenue - adding they would likely close either LO's or RA's manufacturing facility following a deal, "which makes sense given we expect cigarette volume declines to accelerate as e-cigs continue to displace volume," Herzog wrote.

LO shares were down 2.3% at $50.99 each in late trade while RAI was holding on to a 1 cent advance to $53.70 a share.

In other sector news,

(+) DMND, Q2 earnings of $0.09 per share, ex items, beats by $0.01. Revenue falls 0.1% year over year to $220.6 mln, topping Street view by around $3.93 mln.

(-) CZR, Q4 net loss widens from year-ago levels to $12.83 per share, trailing analyst forecasts for a $1.59 per share loss. Revenue rises 3.5% to $2.08 bln, also lagging Street view by around $30 mln.

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

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities
More Headlines for: LO , RAI

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