Lorillard Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Lorillard (NYSE: LO  ) popped 12% in intraday trading today after a better-than-expected outcome from a new FDA draft report on menthol cigarettes.

So what: The FDA report concluded that although menthol cigarettes' minty flavor lures more people to smoke and makes it harder to quit, menthol cigarette smokers are not at greater risk of tobacco-related health issues than regular cigarette smokers. Lorillard's Newport is the best-selling menthol brand, and it accounts for a majority of the company's revenue.

Now what: The panel recommended studies to determine whether restricting menthol cigarettes would increase demand in the illegal market. The report does not set FDA policy or actions, so for now, menthol cigarette makers such as Lorillard and Altria (NYSE: MO  ) can continue selling the products. The FDA is moving slowly, which removes the near-term risk to the stock. Shares currently trade at a P/E ratio of 11.6 after today's pop.

Interested in more info on LO? Add it to your watchlist.

Fool contributor Cindy Johnson has a beneficial interest in Lorillard shares. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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