Lorillard Inc. (LO), the third largest manufacturer of cigarettes in the United States, posted robust third quarter earnings of $1.81 per share, up 25.7% compared with $1.44 per share in the year-ago period. Earnings were well above the Zacks Consensus Estimate of $1.64. The robust increase in earnings was primarily driven by the benefit from Lorillard’s share repurchase program which was accretive by 9.7%.
Quarterly Details
On a year-ago basis, net sales for the quarter (including excise) increased by $148 million or 10.4% to $1,567 million. The increase was driven by higher unit sales volume, higher average prices and lower sales promotion costs. However, excluding such taxes, sales for the quarter moved up 12.6% to $1,073 million compared with $953 million in the year-ago quarter. However, revenues (both including and excluding excise taxes) were well ahead of the Zacks Consensus Estimate of $1,009 million.
In the quarter, total wholesale shipment volume increased 5.8% to 10.003 billion units. Compared with the wholesale shipments’ dip of about 0.8% in the domestic industry, Lorillard’s domestic wholesale shipments increased 5.8% in the quarter, driven by strong growth in the Maverick and Newport brands.
However, the retail market share of its Newport business continued to increase during the quarter by 0.50 share points to 10.8% from 10.3% in the prior-year quarter.
Gross margin, calculated after using net sales excluding excise taxes, expanded to 52.7% compared with 51.2% in the third quarter of 2009, reflecting growth in sales, partially offset by higher costs related to the State Settlement Agreements and the Federal Assessment for Tobacco Growers and the assessment of Food and Drug Administration fees. Operating margin also expanded 220 basis points to 43.3% in the reported period from 41.1% in the prior-year quarter.
Cash Flow and Balance sheet
Lorillard exited the quarter with cash and cash equivalents of $2,112 million and long-term debt of $1,816 million.
Zacks Rank
Lorillard Inc. shares maintain a Zacks #2 Rank, which translates into a short-term Buy recommendation.
LORILLARD CO (LO): Free Stock Analysis Report
Zacks Investment Research
