) delivered fourth quarter 2012 adjusted earnings of 79 cents per
share, which exceeded the prior-year quarterly earnings of 73
cents by 8.2%. The company's earnings also exceeded the Zacks
Consensus Estimate of 76 cents per share.
The results benefited from top-line growth, a lower share
count owing to the company's buyback program, and favorable tax
rates, partially offset by higher interest expenses.
Net sales in the reported quarter went up 5.3% year over year
to $1.70 billion on the back of increased sales in both of its
segments -- cigarettes and electronic cigarettes. Revenues
surpassed the Zacks Consensus Estimate of $1.17 billion.
: Net sales of the cigarette segment increased 2.9% to $1.67
billion, driven by higher average cigarette selling prices and
unit sales volume. Total wholesale cigarette volumes increased
0.3% to 10 billion units in the fourth quarter including Puerto
Rico and U.S. shipments.
In the reported quarter, Lorillard's domestic retail market
share climbed 0.2 share points to 14.2%, whereas domestic retail
market share of the company's flagship brand Newport jumped 0.2
share points to 11.9% in the fourth quarter, driven by increased
Adjusted gross profit increased 1.1% to $620 million, driven
by higher sales offset by higher raw material costs. Adjusted
operating profit increased $2 million to $507 million in the
blu eCigs came into operations in this quarter, thus forming a
new segment. The segment contributed $39 million to Lorillard's
total net sales in the fourth quarter, almost three times the
level of the prior quarter, driven by higher blu eCigs sales
achieved from marketing and expanded retail distribution. blu
eCigs domestic retail market share was over 30% of the electronic
Gross profit was $16 million in the fourth quarter of 2012
while adjusted operating income totaled $7 million.
Full Year 2012 Results
In 2012, Lorillard's adjusted earnings of $2.82 per share
exceeded the prior-year quarterly earnings of $2.63 by 7.2% and
the Zacks Consensus Estimate of $2.79 by 1.1%. The results
benefited from top-line growth and increased retail market share
Net sales in the year went up 2.4% year over year to $6.62
billion on the back of increased sales in both of its segments -
cigarettes and electronic cigarettes.
Other Financial Update
Lorillard's board declared a quarterly dividend hike of 6.5%
on its shares to 55 cents per share. The dividend will be paid on
Mar 11, 2013 to stockholders of record as of Mar 1, 2013. The
company paid its last dividend of 52 cents in Dec, 2012.
Apart from this, in Nov, 2012, the company's board approved a
three-for-one split of Lorillard common stock, which it
distributed in the form of a 200% stock dividend. The additional
shares were distributed on Jan 15, 2013.
The company also repurchased approximately 7.8 million shares
for $304 million under its share repurchase program in the
Overall, we are encouraged by the company's dominant share in
the market with rising popularity of its premium brand Newport
and value brand Maverick. Moreover, it is adapting to changing
consumer demands by investing in less-hazardous alternatives for
tobacco with the acquisition of blu eCigs and developing
However, stiff competition in the domestic cigarette market,
various taxes, numerous legal regulations and proceedings make
the stock volatile. Currently, Lorillard has a Zacks Rank #3
Other stocks in the consumer staples sector worth a look are
Green Mountain Coffee Roasters Inc
H. J. Heinz Co
Altria Group Inc
). While Green Mountain carries a Zacks Rank #1 (Strong Buy),
Heinz and Altria hold a Zacks Rank #2 (Buy).
GREEN MTN COFFE (GMCR): Free Stock Analysis
HEINZ (HJ) CO (HNZ): Free Stock Analysis
LORILLARD CO (LO): Free Stock Analysis Report
ALTRIA GROUP (MO): Free Stock Analysis Report
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