Monday, December 11, 2006

Calls of Note Part 8

- Citigroup notes they increasingly believe Philip Morris USA (NYSE:MO) will announce a price increase/off invoice reduction very soon. Based on conversations with a few of their trade contacts, the firm anticipate the company will increase prices by around $0.10 per pack and the other cigarette

Contacts have also indicated that both Philip Morris and Lorillard have been cutting their wholesaler orders recently, or reduced the amount of inventory wholesalers can purchase (this is typical right ahead of a price increase).

The firm notes they have been predicting for some time now that Philip Morris is likely to lead a
price increase of around $0.10 per pack by the end of the year. Their confidence that this action occurs has increased based on conversations they've had with their industry trade contacts. Citi believes the industry still has some pricing power and it makes sense for the manufacturers to take pricing since all of the tobacco companies are facing higher Master Settlement Agreement (MSA) payments during 2007 of around $0.06 per pack. Furthermore, the firm believe sthe manufacturers are more comfortable taking pricing soon given that state excise taxes did not increase substantially in 2006.

Notablecalls: Not actionable but good to know category. Just happen to like the chart.

1 comment:

TradingGoddess said...

What do you think of this chart? Want to garner a guess?