A Heavier Toll On Tobacco Road

It doesn't make smoking any better for you, but cigarette prices have plunged in the past six months. And the price wars are killing tobacco company earnings. Domestic profits for the third quarter, due out on Oct. 19, will be awful, says Gary Black, an analyst at Sanford C. Bernstein. Income will be down 80% vs. a year ago at American Brands, 68% at R.J. Reynolds Tobacco, and 54% at Philip Morris, he figures. How to stanch the bleeding? Black thinks Reynolds might raise prices in November by 5 a pack, and that Philip Morris and smaller manufacturers will follow suit.

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