US cigarette maker Lorillard Inc. (LO: Quote), Wednesday reported a slight drop in profit for the fourth quarter, as higher operating costs and weak gross margins offset an increase in sales. Sales for the quarter grew five percent largely due to higher shipments and prices. Earnings for the quarter came in ahead of analysts' estimates.
Lorillard, which sells Newport cigarettes, said cigarette sales improved 2.9 percent to $1.67 billion on higher prices and sales volume. Total wholesale volume, which includes Puerto Rico and US Possessions, increased 0.3 percent , while domestic shipments, which excludes Puerto Rico and US Possessions increased 0.4 percent from last year.
Cigarette segment's gross margin, or gross profit as percentage of sales, dropped to 37.7 percent from 39.4 percent last year. Selling, general and administrative costs increased $5 million to $113 million due mainly to higher compensation and benefit costs and higher legal costs related to the Engle Progeny litigation.
Electronic cigarette division's sales generated sales of $39 million for the quarter.
Lorillard's sales for the quarter grew 5.3 percent to $1.70 billion from $1.62 billion last year.
Seven analysts polled by Thomson Reuters had a consensus revenue estimate of $1.16 billion for the quarter.
North Carolina-based Lorillard's fourth-quarter profit dropped to $309 million from $310 million. On a per share basis, earnings rose to $0.80 per share from $0.77 per share last year, due to lower number of shares outstanding.
Adjusted net income for the quarter increased to $304 million or $0.79 per share from $295 million or $0.73 per share last year. Analysts expected earnings of $0.76 per share for the quarter. Analysts' estimates typically exclude special items.
Adjusted earnings increased due to the impact of share repurchases, a lower effective tax rate, the inclusion of operating income of the electronic cigarettes segment.
Lorillard also boosted its dividend by 6.5 percent to $0.55 per share, payable on March 11 to stockholders as of March 1.
LO is currently trading at $42.21, up $2.49 or 6.27%, on the NYSE.
by RTT Staff Writer
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