The FDA filed an advance notice of proposed rulemaking on nicotine levels for combustible tobacco, which starts the clock on what will ultimately be a long process of data gathering, Cowen analyst Vivien Azer tells investors in a research note. The analyst sees the process taking years, not months, given the need for additional research. Azer has Outperform ratings on Altria Group (MO), British American Tobacco (BTI) and Imperial Brands (IMBBY).

After the Biden Administration confirmed an earlier Wall Street Journal report that it will abandon plans to ban menthol cigarettes, Jefferies analyst Owen Bennett said that while the most was widely expected, it now takes the headline risk off the table near-term. The matter could potentially resurface after the election, though if Donald Trump wins, this would be less likely, the analyst tells investors in a research note. The firm noted that the move is a boost in sentiment for British American Tobacco (BTI), Altria (MO), and Imperial Brands (IMBBY), but specifically for British American, which is most exposed. Jefferies has Buy ratings on Altria and British American Tobacco and a Hold rating on Imperial Brands.

Bullish option flow detected in British American Tobacco with 13,934 calls trading, 7x expected, and implied vol increasing over 1 point to 19.80%. May-24 30 calls and May-24 31 calls are the most active options, with total volume in those strikes near 10,100 contracts. The Put/Call Ratio is 0.08. Earnings are expected on July 25th.

The company said, "We reaffirm our 2024 full-year adjusted diluted EPS guidance range of $5.05 to $5.17, representing a growth rate of 2% to 4.5% from a base of $4.95 in 2023. We expect 2024 adjusted diluted EPS growth to be weighted to the second half of the year. Our guidance includes the impact of two additional shipping days in 2024 and assumes limited impact on combustible and e-vapor volumes from enforcement efforts in the illicit e-vapor market. While the 2024 full-year adjusted diluted EPS guidance accounts for a range of scenarios, the external environment remains dynamic. We will continue to monitor conditions related to (i) the economy, including the cumulative impact of inflation, (ii) adult tobacco consumer (ATC) dynamics, including purchasing patterns and adoption of smoke-free products, (iii) illicit e-vapor enforcement and (iv) regulatory, litigation and legislative developments. Our 2024 full-year adjusted diluted EPS guidance range includes planned investments in support of our Vision, such as (i) marketplace activities in support of our smoke-free products and (ii) continued smoke-free product research, development and regulatory preparation expenses. The 2024 full-year adjusted diluted EPS guidance range excludes an estimated per share gain of $1.17 related to the sale of the IQOS Tobacco Heating System commercialization rights that we expect to occur in the second quarter of 2024."

Notable companies reporting before tomorrow's open, with earnings consensus, include Merck (MRK), consensus $1.87... Caterpillar (CAT), consensus $5.14... Comcast (CMSCA), consensus 99c... Honeywell (HON), consensus $2.17... Bristol-Myers (BMY), consensus ($4.44)... Altria (MO), consensus $1.15... Keurig Dr. Pepper (KDP), consensus 35c... GE Vernova (GEV), consensus (37c)... Royal Caribbean (RCL), consensus $1.33... Tractor Supply (TSCO), consensus $1.72... Mobileye (MBLY), consensus (6c)... Textron (TXT), consensus $1.23... LabCorp (LH), consensus $3.48... Southwest Airlines (LUV), consensus (34c)... American Airlines (AAL), consensus (29c)... Harley-Davidson (HOG), consensus $1.51.