Normally, low demand translates into lower prices, but that
hasn't been the case in the cigarette industry. Most tobacco
firms have been raising prices amid waning demand to keep profits
) among them.
The nation's No. 3 cigarette maker behindReynolds American (
) andAltria Group (
) on Wednesday reported solid earnings, up 15% from a year ago to
83 cents a share. Sales rose 10% to $1.83 billion, an
acceleration from 4% growth in the second quarter. Higher
cigarette unit sales volume and higher average net cigarette
selling prices helped.
Lorillard's share of the domestic retail market increased to
14.9% in the quarter, fueled by strength in its Newport Menthol
Despite market share gains, Lorillard is branching out beyond
its traditional cigarette business. In April 2012, it acquired
electronic cigarette maker Blu eCigs for $135 million. Earlier
this month, Lorillard acquired Skycig, a U.K.-based e-cigarette
business for about $49 million. The total value of the deal could
reach $98 million if certain financial performance benchmarks are
E-cigarettes are battery-powered devices that heat a liquid
nicotine solution, creating vapor that users inhale. The market
is still a tiny fraction of the $100 billion cigarette market,
but it is growing quickly.
In the third quarter, e-cigarettes contributed just $63
million to Lorillard's sales, but that was up 350% from a year
ago. The company estimates its share of the U.S. e-cigarette
retail market at 49%.
Lorillard pays a quarterly dividend of 55 cents a share,
giving it an annual yield of 4.5%.
Lorillard cleared a cup with handle at 45.70 in light volume
on Oct. 10. At one point Wednesday, the stock was 8% above the
buy point, slightly extended in price.
Group peer Reynolds American, another member of today's
Dividend Leaders screen, is working on a cup-with-handle base
with a potential buy point of 51.35.