Lorillard Q4 Profit Down 5% Despite Higher Sales

(RTTNews) - U.S. cigarette maker Lorillard, Inc. (LO) on Wednesday reported a 5 percent decline in profit for the fourth quarter from last year, reflecting higher costs and expenses that offset an increase in sales. Adjusted earnings per share for the quarter missed analysts' estimates.

Murray Kessler, Lorillard Chairman, President and CEO said, "Lorillard delivered industry leading double digit EPS growth and its eleventh consecutive year of market share growth in 2013 while the Company concurrently made investments in electronic cigarettes, new cigarette products, and made process changes to smooth wholesale inventory fluctuations in the fourth quarter."

Kessler added, "These investments, combined with the remarkable strength and loyalty of the core Newport brand, give us confidence in our ability to deliver on our stated goal of a double digit total shareholder return as measured by EPS growth and the dividend yield once again in 2014 and for many years to come."

Lorillard's net income for the fourth quarter was $293 million, down from $309 million in the year-ago period. However, earnings per share were flat with last year at $0.80, reflecting fewer number of shares outstanding in the latest quarter.

Adjusted earnings for the quarter were $0.82 per share, compared to $0.79 per share in the same period last year. On average, ten analysts polled by Thomson Reuters expected the company to report earnings of $0.86 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter increased 2 percent to $1.74 billion from $1.70 billion in the previous-year quarter, reflecting higher net sales of cigarettes and electronic cigarettes in the quarter. Analysts had a consensus revenue estimate of $1.31 billion for the quarter.

In the cigarettes segment, net sales for the quarter rose 1 percent from the year-ago period to $1.69 billion. The increase in cigarette net sales resulted primarily from higher average net cigarette selling prices, partly offset by lower cigarette unit sales volume.

Total Lorillard wholesale cigarette unit volume, which includes Puerto Rico and U.S. Possessions, decreased 1.6 percent for the quarter compared to the year-ago period. Total wholesale unit volume for Newport, the company's flagship premium cigarette brand, decreased 0.3 percent.

Meanwhile, electronic cigarettes segment net sales for the quarter surged 39 percent from the prior-year period to $54 million.

The company noted that strong sales of blu eCigs resulted from significant brand building activities. Blu eCigs achieved a 48 percent market share in the quarter. SKYCIG, based in the U.K., was acquired on October 1, 2013 and generated $4 million in net sales during the latest quarter.

For fiscal 2013, Lorillard's net income rose to $1.19 billion or $3.18 per share from $1.10 billion or $2.81 per share in the prior year. Adjusted earnings were $3.12 per share, compared to $2.82 per share last year.

Net sales for the year grew 5 percent to $6.95 billion from $6.62 billion in the previous year.

Street expected the company to earn $3.17 per share for the year on revenues of $5.03 billion.

LO closed Tuesday's trading at $49.95, up $0.50 or 1.01 percent on a volume of 3.95 million shares.