Although tobacco companies have hiked prices to cover the cost of the 1998 nationwide tobacco settlement with U.S. states, the industry could experience diminishing earnings because of other factors.

Fitch analyst Tom Razukas said New York City's proposal to ban smoking in nearly all bars, restaurants, and workplaces is a concern because it "could influence other municipalities, resulting in more restrictions going forward."

Of even greater concern are pending appeals against massive judgments from smokers' lawsuits. Fitch analyst Judi Malter said unsuccessful outcomes in those cases could hurt the credit ratings of tobacco companies.

"Major tobacco firms consistently appeal adverse verdicts and they have not lost a case on appeal which resulted in a payout," said Malter. "If a tobacco company loses at any stage of the appeal process, ratings will be put on review for downgrade."

Another threat to major tobacco companies is discount cigarette makers. Philip Morris, for instance, was forced to increase promotional spending to keep competitors from eating away their customer base.

COMMENTS ON THIS ARTICLE:

Posted by Ray Greenfield on 13 Feb 09 10:59 AM EST

I look forward to the day when these tobacco company are past history, for a number of personal reasons. it kind of reminds me of my dear stepfather who was a very close friend of the actor John Wayne for a number years before he too died from lung cancer. my step father passed away on Dec 25 1987 due to this uncontrollable habit that he just couldn't seem to kick. he was a celebrated chain smoker who puffed down an amazing six packs per day. and even with terminal lung cancer in both lungs, he died with a smoldering cigarette in his left hand, that the paramedics had to pry out of his dead cold fingers. nobody ever suggested that we should file a lawsuit against the tobacco company that was in a way partly responsible for my step dad's untimely death. we were somehow convinced at the time of his passing that he wasn't very concerned about his own health. eventually i found it kind of strange that he just couldn't stop smoking. i mean no matter what he tried to do and how many money first doctors he visited, the man just couldn't kick the habit.

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