U.S. earning for big three cigarettes makers may be down in 1st quarter 2009..



April 2, 2009 - Citi Investment Research analyst Adam Spielman has trimmed his first-quarter earnings estimates for cigarette companies.

In March major cigarette makers raised prices, partly to offset any drop in profit once the per-pack tax climbs from 39 cents to $1.01. Tobacco wholesalers and retailers are trying to limit their inventory temporarily. (With the April 1st tax increase wholesalers and retailers will have to pay for what they own on that day. This "floor" tax requires them to pay 62 cents for each pack of cigarettes they own that day, and this is on top of higher prices cigarette manufacturers are charging.

Spielman expects this lower inventory to cause first-quarter volumes to fall by as much as 15 percent, but reiterated that the inventory destocking is only temporary.
"The volume that is 'missing' from the first quarter will reappear in the second quarter, so we have lifted our second-quarter numbers," Spielman wrote in a client note. We are not expecting to get a clean quarter until the third quarter of 2009.

Spielman lowered his expectations for Altria Group Inc., Reynolds American Inc., and Lorillard Inc., saying that the inventory destocking may limit any gains to the stock price in the near-term.

Stifel Nicolaus & Co. analyst Christopher Growe trimmed his first-quarter earnings estimate for Altria by 8 cents to 39 cents to account for the lower inventory. Shares of Lorillard slipped 58 cents to $64, shares of Altria Group declined 41 cents, or 2.4 percent, to $16.80, and shares of Reynolds lost 95 cents, or 2.5 percent, to $36.77.

Reference: Sector Snap: Analyst trims tobacco estimatesAssociated Press - Forbes.com, 3/27/209.

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