Why Lorillard (LO) Is Down Today

NEW YORK (TheStreet) -- Lorillard  (LO) was falling 5.57% to $47.17 on Wednesday morning after the tobacco company posted fourth-quarter results that were slightly less than analysts' expectations.

The company reported earnings per share, excluding items, of 82 cents, 4 cents less than the Capital IQ consensus estimate. Revenues increased 3.6% year-over-year to $1.25 billion, less than the consensus estimate of $1.31 billion. 

Fourth quarter net sales increased 2.3% year over year to $1.743 billion and annual net sales increased 4.9% year over year to a record $6.95 billion. In the fourth quarter, cigarette net sales increased 1.4%, or $24 million, year over year to $1.689 billion from $1.665 billion.

"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," said Chairman, President and CEO Murray S. Kessler in the company's statement. "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."

Must Read: Lorillard (LO) Is Today's Water-Logged And Getting Wetter Stock

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 some important positives, 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, solid stock price performance and expanding profit margins. 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:

  • The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 12.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • LORILLARD INC' earnings per share from the most recent quarter came in slightly below the year earlier 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 $2.81 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($3.17 versus $2.81).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for LORILLARD INC is rather high; currently it is at 51.83%. 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, the net profit margin of 19.69% trails the industry average.
  • Net operating cash flow has declined marginally to $553.00 million or 4.32% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • You can view the full analysis from the report here: LO Ratings Report

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