NEW YORK (TheStreet) -- Lorillard (LO) shares are up 0.6% to $60.87 after having its price target raised to $65 from $57 by analysts at Morgan Stanley (MS - Get Report) who see the merger of the company with rival Reynolds American (RAI - Get Report) as being "more likely than not".
Separately, TheStreet Ratings team rates LORILLARD INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate LORILLARD INC (LO) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- LO's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 0.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- LORILLARD INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LORILLARD INC increased its bottom line by earning $3.14 versus $2.81 in the prior year. This year, the market expects an improvement in earnings ($3.42 versus $3.14).
- The gross profit margin for LORILLARD INC is rather high; currently it is at 53.97%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 23.13% trails the industry average.
- Compared to its closing price of one year ago, LO's share price has jumped by 42.20%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Net operating cash flow has decreased to -$628.00 million or 21.47% when compared to the same quarter last year. Despite a decrease in cash flow of 21.47%, LORILLARD INC is still significantly exceeding the industry average of -120.29%.
- You can view the full analysis from the report here: LO Ratings Report