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Bull boosts Big Tobacco
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August 11, 2000: 12:37 p.m. ET
Tobacco shares jump after analyst at Goldman Sachs raises valuations
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NEW YORK (CNNfn) - Goldman Sachs analyst Marc Cohen said a valuation analysis of Philip Morris Cos. and Loews Corp. indicates that shares of the companies, both of which have large non-tobacco units, could rise 50 to 60 percent by next year.
In a research note issued Thursday afternoon, Cohen reiterated a 12-month target price of $40 for Philip Morris (MO: Research, Estimates) and $95 for Loews.
Cohen said he believes that while last month's $145 billion punitive damage verdict in the Engle class action suit will be the "high-water mark in litigation against the tobacco industry," he remains bullish on tobacco company valuations in the next 12 to 18 months "as the threat of aggregated claims cases recedes."
A Florida jury hit Philip Morris and other major cigarette makers with a whopping amount in punitive damages, one of the largest awards to plaintiffs in a smokers' class action suit. According to the verdict, Philip Morris would be responsible for about half of that amount, although it and the other companies have vowed to appeal, a move industry analysts say, will drag on for years.
 Besides being the top U.S. cigarette maker, Philip Morris includes Kraft, the largest U.S. food maker, and Miller Brewing Co. Loews (LTR: Research, Estimates) has majority stakes in cigarette maker Lorillard, insurer CNA Financial Corp. (CNA: Research, Estimates), Loews Hotels, Diamond Offshore Drilling Inc. (DO: Research, Estimates), and watch-maker Bulova Corp.
Shares of U.S. tobacco companies bolted higher Friday morning. Loews shares were showing the highest percentage gain on the New York Stock Exchange, up almost 12 percent, or 8-15/16, at 85. Philip Morris shares
were up about 8 percent, or 2-15/16, at 31, while R.J. Reynolds (RJR: Research, Estimates) shares climbed 1-15/16 to 35-1/4 on the New York Stock Exchange.
UST Inc. (UST: Research, Estimates) shares were up 1/2 at 16-3/4 after the company, the top U.S. maker of chewing tobacco, announced that the Kentucky court hearing its Conwood lawsuit granted UST's request that the appeal bond be set substantially below the judgment amount, setting it at $500 million. 
-- from staff and wire reports
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Philip Morris
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