RESEARCH ALERT (UPDATE 1) - Analysts upbeat on Lorillard

(Adds details, CHICAGO to dateline)

CHICAGO, June 11 (Reuters) - Cigarette maker Lorillard Inc, (LO.N: Quote, Profile, Research, Stock Buzz) is poised to increase shareholder value, two analysts wrote in research notes released on Wednesday.

Morgan Stanley initiated coverage of the company, whose brands include Newport, Kent and Maverick, with an "overweight" rating and set a 12-month price target of $85. Goldman Sachs added the company to its conviction buy list and increased its price target of the company to $89 from $86.

Lorillard began trading Tuesday on the New York Stock Exchange and was up 39 cents at $77.02 in morning trading on Wednesday. Parent company Loews Corp LTR.N completed the spinoff of Lorillard this week,

"We believe Lorillard's current valuation fully reflects neither the superior long-term fundamentals of the Newport brand nor Lorillard's strategic value in a consolidating industry," wrote Morgan Stanley analyst David Adelman in a research note.

Lorillard leads the menthol cigarette field, which has been gaining market share as the U.S. industry struggles amid higher cigarette taxes and health concerns, analysts noted.

Morgan Stanley set earnings per share guidance of $5.20 for fiscal 2008, while Goldman estimated earnings per share at $5.22.

"We see Lorillard as a uniquely positioned cigarette company with the best fundamentals in the U.S. through peer leading top line growth and per unit profitability," wrote Goldman Sachs analyst Judy Hong.

Hong added that the company is a probable acquisition target in the near future.

"At the very least, the stock is likely to trade with a take-over premium given the attractiveness of Lorillard to potential acquirers," Hong said. (Reporting by Erin Zureick, editing by Dave Zimmerman)