NEW YORK - Cigarette makers are likely to lift prices before the end of the year, a Morgan Stanley analyst said Monday, and the hike is likely to begin with industry leader Philip Morris USA.

Morgan Stanley analyst David J. Adelman in a client note said he expects Philip Morris, maker of Marlboro and Parliament cigarettes, to set off an increase in manufacturer prices for domestic cigarettes through a reduction in promotion spending, rather than a gross wholesale price increase.

The pricing change is likely to occur by mid-to-late December, as it has in past years, Adelman wrote. The announcement from the cigarette-industry leader will probably come on a Friday, he added.

"During December 2006, we expect Philip Morris USA to lead a somewhat above-recent-average price increase most likely $0.10 per pack, and perhaps as much as $0.15 per pack between now and mid-to-late December 2007," wrote Adelman.

The pricing change will probably encourage smaller rivals Reynolds American Inc., maker of Camel cigarettes, and Lorillard, maker of Newports, to lift prices as well, the analyst wrote. That could occur though a combination of trimmed promotional spending and higher wholesale prices, he added.

"We believe that the industry's fundamental outlook has been, and will remain for the foreseeable future, favorable," wrote Adelman, who believes a price increase could be proof of the industry's strength.

Shares of Altria Group Inc., parent of Philip Morris USA, rose 58 cents to $84.57 on the New York Stock Exchange.

Carolina Group, Loews' tracking stock for Lorillard Tobacco, added 68 cents to $62.77, while Loews Corp. lost 1 cent to $40.31 on the NYSE.

Reynolds American added $1.81, or 2.8 percent, to $65.66 on the Big Board.