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Lorillard Inc. Stock Buy Recommendation Reiterated (LO)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Lorillard (NYSE: LO) has been reiterated by TheStreet Ratings as a buy with a ratings score of B-. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:

  • LO's revenue growth has slightly outpaced the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 7.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • LORILLARD INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LORILLARD INC increased its bottom line by earning $2.81 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($3.09 versus $2.81).
  • Net operating cash flow has slightly increased to $529.00 million or 7.73% when compared to the same quarter last year. Despite an increase in cash flow of 7.73%, LORILLARD INC is still growing at a significantly lower rate than the industry average of 67.68%.
  • The gross profit margin for LORILLARD INC is rather high; currently it is at 54.10%. Regardless of LO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LO's net profit margin of 25.57% compares favorably to the industry average.
  • LO has underperformed the S&P 500 Index, declining 9.11% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

Lorillard, Inc. manufactures and sells cigarettes in the United States. The company operates through two segments, Cigarettes and Electronic Cigarettes. The Cigarettes segment manufactures and sells cigarettes. Lorillard has a market cap of $15.5 billion and is part of the consumer goods sector and tobacco industry. The company has a P/E ratio of 15.00, below the S&P 500 P/E ratio of 18.00. Shares are up 6% year to date as of the close of trading on Friday.

You can view the full Lorillard Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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