) delivered first quarter 2013 adjusted earnings of 66 cents per
share, which exceeded the prior-year quarterly earnings of 58
cents per share by 13.8%. The company's earnings also exceeded
the Zacks Consensus Estimate of 63 cents per share by 4.8%. The
company's electronic cigarette brand - blu e-Cigs - and continued
increase in retail market share of cigarettes proved to be
Lorillard's strength in the first quarter of 2013. The company's
share buyback program also fueled earnings.
Net sales in the reported quarter went up 3.3% year over year
to $1.58 billion on the back of increased sales of electronic
cigarettes, partially offset by weak sales at the Cigarettes
segment. Revenues surpassed the Zacks Consensus Estimate of $1.12
Net sales of the cigarette segment declined 0.4% to $1.52 billion
due to lower cigarette unit sales volume, partially offset by
higher average net cigarette selling prices. Total wholesale
cigarette volumes decreased 2.3% to 9.2 billion units in the
first quarter including Puerto Rico and U.S. shipments.
In the reported quarter, Lorillard's domestic retail market
share climbed 0.4 share points to 14.9%, whereas domestic retail
market share of the company's flagship brand Newport jumped 0.5
share points to 12.7%, driven by increased promotional activity
for the new Newport Menthol launched in the core markets.
Adjusted operating profit increased 8% to $431 million in the
quarter, owing to lower selling, general and administrative
Lorillard formed this segment following the acquisition of the
blu eCigs brand on Apr 24, 2012. The segment contributed $57
million to Lorillard's total net sales in the first quarter,
driven by higher blu eCigs sales achieved from marketing and
expanded retail distribution. In the first quarter, blu eCigs
distribution expanded to more than 80,000 retail outlets and its
domestic retail market share was over 40% of the electronic
Adjusted operating income totaled $7 million.
Other Financial Update
On Mar 11, Lorillard paid a quarterly dividend of 55 cents to
stockholders of record as of Mar 1, 2013. The dividend of 55
cents was increased from 52 cents.
Apart from this, Lorillard completed its $500 million share
repurchase program at the end of Jan, 2013, announced earlier in
Aug 2012, by repurchasing 2.8 million shares at a cost of $109
million. On Mar 8, 2013, Lorillard's board approved a new share
repurchase program of $500 million. During the first quarter of
2013, the company repurchased approximately 1 million shares at a
cost of $40 million under the $500 million share repurchase
program announced in Mar 2013. The company has $460 million worth
of shares remaining in its share buyback program.
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. Lorillard's Newport cigarette brand
continued to gain popularity even with higher cigarette pricing
amid overall slowdown in the cigarette industry. In addition, the
rising demand for electronic cigarettes is expected to boost blu
e-Cigs sales, going ahead. Currently, Lorillard has a Zacks Rank
Other stocks in the consumer staples sector worth a look are
Flower Foods Inc
Altria Group Inc
). While Flower Foods carries a Zacks Rank #1 (Strong Buy),
Kellogg and Altria hold a Zacks Rank #2 (Buy).
FLOWERS FOODS (FLO): Free Stock Analysis
KELLOGG CO (K): Free Stock Analysis Report
LORILLARD CO (LO): Free Stock Analysis Report
ALTRIA GROUP (MO): Free Stock Analysis Report
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