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Lorillard is the second of the domestic cigarette manufacturers to report, and the results are obviously consistent with RAI’s – weaker volume, better pricing and profitability.  We still aren’t seeing a whole lot to do in the domestic names at this point.


What we liked:

  • EPS ahead of consensus ($0.66 vs. $0.64)
  • Solid increases in net revenue per unit (+3.6%) and operating income per unit ($4.47)
  • Continued good performance from the electronic cigarette segment  - $50 million in revenue and $7 million of operating income
  • Newport volume declined only 1.6% in the quarter, outpacing the industry by a wide margin, driving total volume declines of 2.3% in the quarter
  • New $500 million share repurchase program (announced on March 8th) keeps “creeping LBO” trend going

What we didn’t like:

  • Volume decline was against easiest comparison of the year
  • Increase in revenue per unit (pricing) was against easiest comparison of the year, Q2 and Q3 are more difficult
  • Per unit operating income comparisons get more difficult in the next two quarters as well
  • Sequential decline in electronic cigarette segment profitability (same level of operating income as in Q4 on $11 million increase in sales


Call with questions,



Robert  Campagnino

Managing Director




Matt Hedrick

Senior Analyst