Most major US tobacco companies announced price increases of about 7 cents per pack of cigarettes late last month. "Overall the cigarette promo decreases/list price increases that Lorillard Inc. (NYSE:LO), Altria Group Inc (NYSE:MO) and now Reynolds American, Inc.(NYSE:RAI) have taken are positive and indicate continued pricing power," said Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC. "Given that consumption will likely continue to decline in the mid-single-digit range, pricing is necessary to drive topline growth."
Tobacco companies’ shares underperforming
Regardless of price increases, tobacco companies’ shares have under-performed compared to the S&P 500 (INDEXSP:.INX) index over the last month as shown in this chart below.
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