Tobacco stocks waft higher on ruling in government lawsuit
Investors sent cigarette stocks up Friday as Wall Street digested a federal judge's decision in a landmark civil racketeering case that pitted the U.S. government against Big Tobacco.
Reynolds American Inc. (NYSE: RAI) was trading at $64.81 a share in early afternoon trading, up 74 cents, or just more than 1 percent, from its Thursday close of $64.07.
Carolina Group (NYSE: CG), a tracking stock that represents the value of Loews Corp.'s Lorillard Tobacco Co., was trading around $58.65, up $1.34, or more than 2 percent, from its Thursday close of $57.31.
Winston-Salem-based Reynolds and Greensboro-based Lorillard are, respectively, the second- and third-largest cigarette makers in the United States. Both companies were defendants in the government's civil racketeering lawsuit.
U.S. District Judge Gladys Kessler issued a ruling Thursday that found for the government on its main points, but she said she didn't have the authority to levy financial penalties.
She did order tobacco companies to stop using certain terms, such as "light" and "low-tar," in their marketing. She also said the tobacco companies must admit, in newspaper and television ads, that smoking is dangerous and addictive and that they've lied about that in the past.
A spokesman for Reynolds told The Business Journal Thursday that his company was disappointed in the judge's ruling, but "gratified" that she didn't impose monetary penalties.
He said the company hadn't yet decided its next course of action, but it and other cigarette makers could appeal.
The Justice Department issued a statement saying it was pleased with the judge's finding of the companies' liability, but disappointed she didn't apply the remedies -- billions of dollars in payments to fund anti-smoking efforts -- government lawyers had sought.
