FDA Cigarette Warnings Getting More Harsh Than Europe (MO, RAI, LO, VGR, PFE)

The FDA is about to give some serious warning labels on cigarette labels.  Altria Group Inc. (NYSE: MO), Reynolds American Inc. (NYSE: RAI), Lorillard, Inc. (NYSE: LO)  and Vector Group Ltd. (NYSE: VGR) are bound to be affected.

The images are far more graphic than the image that I took of an advertisement in the Frankfurt Airport in Europe.

We have included each of these images below and they are not exactly ‘pretty’ by any standard.  It is not too shocking, but the tobacco companies are seeing their shares priced lower today.

News just came from Philip Morris USA yesterday that a federal judge in Florida had dismissed a medical monitoring class action case because plaintiffs failed to allege a legally proper claim for medical monitoring.

At what point do courts just stop accepting tobacco cases?  It is not like you can still smoke and think it is not a killer.

Courts can say “You should have known better” or more importantly they can say “Look, we tax the hell out of tobacco and we need the tax revenues.”

Still, these warning labels are ugly enough that you have to winder if it will impact the domestic sales or not.

Shares of each are down while the broad market is up.

Most tobacco stocks have performed well, and they usually offer great dividends for investors.

Altria Group Inc. (NYSE: MO) is down by 0.4% at $27.22 right before the closing bell and its 52-week trading range is $19.53 to $28.13; the dividend yield is listed as 5.6%. Its 2010 sales were $24.363 billion.

Reynolds American Inc. (NYSE: RAI) is down by 0.3% at $38.12 right before the closing bell and its 52-week trading range is $25.62 to $39.87; the dividend yield is listed as 5.6%. Its 2010 sales were $8.932 billion.

Lorillard, Inc. (NYSE: LO) is actually up by 0.4% at $111.61 right before the closing bell and its 52-week trading range is $70.87 to $116.90; the dividend yield is listed as 4.7%. Its 2010 sales were $5.932 billion.

Vector Group Ltd. (NYSE: VGR) is down by 0.55% at $18.20 right before the closing bell and its 52-week trading range is $15.37 to $20.80; the dividend yield is listed as 8.8%.  Its 2010 sales were $1.063 billion.

There is one other consideration, and that is the world of “Good intentions gone awry.”  Pfizer Inc. (NYSE: PFE) makes a smoking cessation drug called Chantix.  This drug has been tied to radical psychotic episodes and now there are fresh warnings about cardiovascular risks which are out.  What do you do when the drug side effects are worse than the cause?

JON C. OGG