For Immediate Release
Chicago, IL – July 13, 2009 – Zacks.com announces the latest Industry Outlook. Today’s outlook from Zacks Equity Research analyst Steven Ralston discusses the Consumer Staples sector. Highlighted stocks include: Altria (MO) and Reynolds American (RAI).
Here is the latest on the Consumer Staples sector:
Additional regulation of tobacco products by the U.S. Federal Government is now expected. On June 8, 2009, the U.S. Senate again passed legislation, empowering the U.S. Food and Drug Administration (FDA) to regulate cigarettes and other tobacco products. Over the last several years, the House had not passed a similar bill, but in April, the House finally passed a comparable measure, indicating a more stringent regulatory framework for all domestic tobacco companies in the future.
The tobacco companies are losing product liability law suits. In late March 2006, the U.S. Supreme Court refused to hear an appeal in the Boeken case; therefore, Altria (MO) paid the $50 million judgment, despite claiming the judgment was excessive. Altria also lost the Bullock case; however, a new trial is scheduled to revise the amount of initial punitive damages of $28 million.
Lastly, in March 2009, Altria lost the Williams case when the U.S Supreme Court dismissed the Altria’s appeal of a 1999 punitive damages award of $79.5 million. However, the company is delaying payment by disputing an Oregon state law that requires 60% of any punitive damages should be paid to the state.
As a result of these negative developments, the ratings on both domestic tobacco companies, Altria and Reynolds American (RAI), are rated Sells.
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