Salomon Cuts Tobacco Targets

Analyst Bonnie Herzog says Philip Morris' recent earnings warning confirms her concerns of deteriorating fundamentals

Salomon Smith Barney downgraded the tobacco industry to marketweight from overweight, and cut its price target on Philip Morris (MO ), RJ Reynolds (RJR ) and Loew's Carolina Group (CG ).

Analyst Bonnie Herzog says the tobacco industry downgrade is based on a deterioration of fundamentals. She notes several of her recent concerns about the industry were confirmed by Philip Morris' recent earnings warning.

She cut Philip Morris' fourth-quarter earnings per share estimate to $0.93, and cut the $4.85 2002 estimate to $4.58. She maintains her outperform rating on Philip Morris, but believes the stock could trade in a tight range and be sluggish possibly through the end of the year. She cut her $68 Philip Morris target to $50.

Finally, Herzog reduced her $58 RJ Reynolds target to $48, and cut her $37 Loew's Carolina target to $28.

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