Profit cut predicted

| June 18, 2019

Profits for major U.S. tobacco companies could be cut in half if the Food and Drug Administration (FDA) adopts a “maximum nicotine” rule, according to analysts at Morgan Stanley.

The FDA is set to publish in October its proposed rule regulating the amount of nicotine allowed in cigarettes and other tobacco products “so that they are minimally addictive.”

The regulation, if adopted by 2035, would cost the tobacco industry roughly $165 billion in lost profits, Morgan Stanley analysts wrote in a research report. Morgan Stanley has also rated the stock of Imperial Brands and Altria as underweight, and downgraded British American Tobacco to underweight.

The proposed rule change would shave an estimated 20 percent off of Altria’s market value, 13 percent off British American Tobacco and 5 percent off Imperial Brands.

Category: Breaking News

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