Shares of UST Inc. edged higher in premarket trading Monday after a Deutsche Bank analyst upgraded the smokeless tobacco maker, citing its recent decline in price.
Andrew Kieley raised UST to "Buy" from "Hold" in a note to investors late Sunday. Shares gained 20 cents to $51.67 Monday morning.
Kieley said shares of the Stamford, Conn., company are undervalued given improving profitability and cash flow growth, calling the company a "dominant smokeless player."
The analyst said the stock's recent declines are primarily driven by concerns about the broader tobacco sector and overlook the company's positive attributes. UST shares have lost 14 percent from a 52-week high of $59.95 in December.
"While the outlook for cigarette volumes has worsened this year, the smokeless market continues to expand ... UST's volume performance within the category has improved as it has narrowed price gaps against discount competitors, launched new products and recruited smokers," he said.
Kieley maintained his $58 price target, implying he expects the stock to gain nearly 13 percent.
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