Lorillard Q2 Profit Drops - Update

(RTTNews) - Lorillard Inc (LO) on Wednesday reported a 4 percent decline in second-quarter profit, hurt by lower demand for its electronic cigarettes amid stiff competition in the segment, with earnings falling short of Wall Street estimates.

Lorillard, which is being bought by Reynolds American Inc (RAI), said electronic cigarette sales plunged 35 percent from a year ago, while traditional cigarette sales climbed a modest 1 percent.

The tobacco market is in a state of flux, seeing rapid demand for electronic cigarettes, while sales volumes of traditional cigarettes continue to remain under pressure owing to tight regulation and the impact of tax.

But competition for electronic cigarettes is rife as companies see this segment as promising for future growth.

Lorillard posted second-quarter net earnings of $300 million, compared with $313 million in the prior year. On a per share basis, earnings were at $0.83.

Excluding items, adjusted earnings for the quarter were $0.84 per share, compared with $0.81 per share a year ago. On average, eight analysts polled by Thomson Reuters expected earnings of $0.89 per share for the quarter. Analysts' estimates typically exclude special items.

Lorillard, famed for its Newport menthol brand of cigarettes, said sales for the quarter slid 0.3 percent from last year to about $1.80 billion.

Lorillard's total cigarette shipments fell 3.4 percent.

In mid-July, Greensboro, North Carolina-based Lorillard agreed to be acquired by bigger rival Reynolds American for $27.4 billion, in a bid to compete with industry leader Altria Group Inc (MO). The combined company will generate annual revenues of more than $11 billion.

On Tuesday, Reynolds American reported a 7 percent increase in quarterly profit, led by higher cigarette and moist-snuff pricing as well as one-time gains, partly offset by lower cigarette volume.

Lorillard stock is trading at $60.89, down $0.70 or 1.14%, on a volume of 1.5 million shares on the NYSE.