Lorillard's Earnings Impress; E-Cig Market Strengthens


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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 up.

CountLorillard ( LO ) among them.

The nation's No. 3 cigarette maker behindReynolds American ( RAI ) andAltria Group ( MO ) 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 brand.

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 met.

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance Investing Ideas
Referenced Stocks: LO , MO , RAI

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