Analysts Defend Tobacco Names Following FDA's Menthol Report, See Ban as Unlikely

Several analysts are defending stocks in the Tobacco group Tuesday following an earlier comment from the FDA that menthol cigarettes likely have a "public health impact." Stocks in the sector are trading lower amid the concern. Altria MO shares are down 2.4 percent, Reynolds American RAI shares are down 2 percent, and shares of Lorillard LO, the maker of Newport-brand cigarettes, are leading the sector lower down more than 4 percent. JP Morgan's Rae Maile suggested buying shares of Reynolds American and/or Altria following the FDA menthol report. He said the report has created a buying opportunity. Maile sees an unlikely chance that menthol cigarettes will ultimately be banned. Jefferies' Thilo Wrede echoed a similar sentiment, saying a final decision on menthol is still "years away." He placed a chance of ban as less than 50 percent.