Lorillard Inc. (LO) reported adjusted third-quarter 2011 earnings of $1.76 per share, missing the Zacks Consensus Estimate of $2.04 per share. However, the results exceeded the prior-year earnings by 7.2%.
The adjusted earnings in the third quarter 2011 exclude the benefit of 18 cents, owing to the share repurchase program of Lorillard, which also resulted in lower outstanding shares.
Including the benefit of the share repurchase program, Lorillard posted earnings of $267 million, or $1.94 per share in the third quarter of 2011, compared with net income of $274 million, or $1.81 per share in the prior-year quarter.
Quarter in Detail
Net sales for the reported quarter increased 3.5% year over year to $1.622 billion, exceeding the Zacks Consensus Estimate of $1.145 billion.
Increased net sales figure were attributable to higher unit sales volume and higher average prices, partially offset by higher sales promotion costs, which were primarily driven by the introduction of Newport Non-Menthol.
Total wholesale shipment volume of Lorillard increased 2.8% to 10.3 billion units, including Puerto Rico and U.S. Possessions, while total domestic wholesale shipments, excluding Puerto Rico and U.S. Possessions also rose 2.8%.
Domestic wholesale shipments for Lorillard’s Newport increased 2.5% year over year, while the company’s domestic wholesale shipments for Maverick increased 7.0% in the third quarter of 2011.
Total cigarette industry domestic wholesale shipments plummeted approximately 6.4% in the third quarter of 2011.
Lorillard's domestic retail market share climbed 1.3 share points in the reported quarter to a market share of 14.2%, while Newport's domestic retail market share escalated 1.3 share points to 11.9% in the third quarter of 2011.
Gross margin plunged 140 basis points (bps) to 34.7% compared with 36.1% in the third quarter of 2010. Gross profit increased to $563 million in the reported quarter from the $566 million in the prior-year quarter, driven by the higher costs related to the State Settlement Agreements and the Federal Assessment for Tobacco Growers and higher Food and Drug Administration user fees, partially offset by the increase in net sales.
Capital Structure
Lorillard ended the quarter with cash and cash equivalents of $1.70 billion and long-term debt of $2.6 billion.
During the third quarter of 2011, Lorillard also repurchased 4.0 million shares at a cost of $438 million.
Lorillard competes with Philip Morris Inc. (PM), which reported third quarter 2011 earnings per share, excluding special items, of $1.37, surpassing the Zacks Consensus Estimate of $1.23.
Lorillard currently has a Zacks #3 Rank which implies short term Hold rating on the stock.
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