Lorillard Misses Estimates - Analyst Blog
July 25 2011 - 9:22AM
Zacks
Lorillard Inc. (LO) reported results for the
second quarter of fiscal 2011 with earnings of $1.91 per share,
missing the Zacks Consensus Estimate of $2.02 per share. However,
the results exceeded the prior-year earnings of $1.73 per
share.
The adjusted earnings in the second quarter of 2011 exclude the
benefit of 14 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 $291 million, or $2.05 per share in the second
quarter of 2011, up from the net income of $263 million, or $1.73
per share in the prior-year quarter.
The improved results were due to the impact of the new strategic
growth initiatives, supported by the successful introduction of
Newport Non-Menthol.
Quarter in Detail
Net sales (excluding excise taxes) for the reported quarter
increased 11.7% year over year to $1.159 billion, exceeding the
Zacks Consensus Estimate of $1.148 billion.
Lorillard’s net sales (including excise taxes) for the quarter
increased 11.3% year over year to $1.69 billion, on the back of
higher unit sales volume and higher average prices, partially
offset by higher sales promotion costs primarily driven by the
introduction of Newport Non-Menthol.
Total wholesale shipment volume of Lorillard increased 9.9% to
10.8 billion units, including Puerto Rico and U.S. Possessions,
while total domestic wholesale shipments, excluding Puerto Rico and
U.S. Possessions rose 10.4%.
Domestic wholesale shipments for Lorillard’s Newport increased
9.6% year over year, while the company’s domestic wholesale
shipments for Maverick increased 21.2% in the second quarter of
2011.
Total cigarette industry domestic wholesale shipments plummeted
approximately 1.3% in the second quarter of 2011.
Lorillard's domestic retail market share climbed 1.4 share
points in the reported quarter to a market share of 14.2%, while
Newport's domestic retail market share escalated 1.1 share points
to 12.0% in the second quarter of 2011.
Gross margin plunged 30 basis points (bps) to 35.4% compared
with 35.7% in the second quarter of 2010. Gross profit increased to
$599 million in the reported quarter from the $542 million in the
prior-year quarter, driven by the increase in net sales, partially
offset by higher costs related to the State Settlement Agreements
and the Federal Assessment for Tobacco Growers and higher Food and
Drug Administration user fees.
Capital Structure
Lorillard ended the quarter with cash and cash equivalents of
$1.15 billion and long-term debt of $1.78 billion.
During the second quarter of 2011 Lorillard also repurchased 4.5
million shares for $494 million.
Lorillard competes with Reynolds American Inc.
(RAI), which reported its fourth-quarter 2011 results on July 22,
2011, missing the Zacks Consensus Estimate by 3 cents. However, it
inched up 1.5% compared with the prior-year quarter.
Another peer, Altria Group Inc. (MO) posted
earnings of 53 cents per share in line with the Zacks Consensus
Estimate in the second quarter of 2011 and was also up 6.0% from
the prior-year quarter.
LORILLARD CO (LO): Free Stock Analysis Report
ALTRIA GROUP (MO): Free Stock Analysis Report
REYNOLDS AMER (RAI): Free Stock Analysis Report
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