Please ensure Javascript is enabled for purposes of website accessibility

Why British American Tobacco, Lumentum Holdings, and Edison International Slumped Today

By Dan Caplinger – Nov 12, 2018 at 4:32PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Find out what made these stocks lead the stock market lower.

Wall Street suffered a setback on Monday, and the Dow Jones Industrial Average lost more than 600 points as major benchmarks followed suit with significant declines. A combination of concerns about global trade, currency markets, and future political posturing in the U.S. and Europe all weighed on stocks. Adding to the gloom was bad news from a host of high-profile companies. British American Tobacco (BTI 1.44%), Lumentum Holdings (LITE -1.36%), and Edison International (EIX -0.41%) were among the worst performers on the day. Here's why they did so poorly.

BAT fears potential menthol ban

Shares of British American Tobacco fell 9% on concerns that the U.S. Food and Drug Administration will finally move forward with its long-threatened ban on menthol-flavored cigarettes. FDA commissioner Scott Gottlieb made comments about an expected ban on flavored e-cigarettes but also said that it would add traditional cigarettes with menthol flavoring to its anticipated measure later this week. The move would hit BAT especially hard, because its Reynolds American unit in the U.S. owns the leading menthol brand, Newport. Investors have worried about new regulation for a long time, but the idea that it could actually come soon spells trouble for British American in particular.

Glass sculpture of head with cigarette in its mouth.

Image source: British American Tobacco.

Lights out at Lumentum

Lumentum Holdings stock plunged 33% after the supplier of 3D-sensing diodes issued a sales warning that sent shivers across the mobile device industry. CEO Alan Lowe said that a major customer asked Lumentum to "materially reduce shipments to them during our fiscal second quarter for previously placed orders that were originally scheduled for delivery during the quarter." Most analysts assume that customer was Apple (AAPL -1.73%), and the iPhone maker's stock also fell. The downward revision to Lumentum's guidance included a nearly 20% cut to revenue and a roughly 25% to 30% reduction for earnings expectations, and that shows how much it and other suppliers rely on Apple's continued success.

Edison feels the pressure again

Finally, shares of Edison International declined another 12%, adding to their losses late last week. The utility company said that it will cooperate with investigations into wildfires in its California service area, with the possible outcome that Edison's Southern California subsidiary could have to bear at least some liability for the Woolsey fire that's currently burning northwest of Los Angeles. After having never fully recovered from the hit that shares took following wildfires in late 2017, investors are more nervous than ever that what most saw as a conservative investment could turn out to have huge risks.

Dan Caplinger owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.