UST Shares Jump on Marlboro Entrance
Monday June 11, 3:34 pm ET
Shares of UST Rise on Analyst Upgrade Citing a Boost From Marlboro's New Smokeless Tobacco
NEW YORK (AP) -- Shares of UST Inc., the holding company of United States Smokeless Tobacco Co., jumped Monday after an analyst upgraded the stock, saying Marlboro's foray into the smokeless tobacco business could help the country's largest snuff maker.
Shares of Greenwich, Conn.-based UST rose $2.90, or 5.6 percent, to $54.38 in afternoon trading. The stock has traded from $42.60 to $61.17 over the past year.
Altria Group Inc.'s Philip Morris USA soon plans to begin test-marketing a smokeless tobacco product under its world-famous Marlboro brand. The small pouches of tobacco, known as snus, are designed to fit between customers' cheek and gum.
UBS analyst Nik Modi said that could be good news for UST, which with popular brands Copenhagen and Skoal has the market cornered on moist snuff, also known as "dip."
Modi upgraded UST stock from "Neutral" to "Buy."
"We see PM USA's announcement to launch Marlboro Snus as a positive for UST," Modi wrote, suggesting it will increase awareness of snus from the trade and consumers. He noted the "overlap" between snus and moist smokeless tobacco is low, and test markets with snus have shown "category acceleration" for other smokeless tobacco products.
UST is testing small tobacco pouches of its own.
Modi also dismissed concerns about American Smokeless Tobacco Co.'s introduction of "deep discount" moist snuff brand Bobcat, writing that it is unappealing to large wholesalers and retailers, has a lower quality taste and lacks the resources of larger companies.
Following UST's stock jump Monday, Citigroup analyst Bonnie Herzog issued a note warning that the day's "strength in UST's stock is highly unwarranted" and reiterated a "Sell" rating on the shares. The theory that UST products would benefit from increased customer awareness due to the introduction of Marlboro Snus "is flawed," she wrote.
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