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November 3, 2010 - Lorillard, Inc. (LO-NYSE) through its subsidiaries, engages in the manufacture and sale of cigarettes in the United States. The company has 44 different product offerings under the Newport, Kent, True, Maverick, Old Gold, and Max brand names.

Earnings are about to pop at LO. While they were flat from 2007 to 2008 at $5.16 a share, they moved up to $5.76 last year. This year, 10 analysts have a consensus estimate of $6.68, a 16% improvement. For 2011, the consensus is for $7.29, another 9% gain. Third quarter results were just out and registered $1.64, 10.4% better than analysts' estimates and well ahead of last year's $1.44. For the last 4 quarters the company has beaten estimates by .7%, 23%, 7.5%, and 10.4% respectively. For the fourth quarter, look for $1.66 compared to $1.52 last year in the final period.

Part of the higher earnings comes from higher prices. The company has been able to raise selling prices to help offset lower volumes. During the second quarter, the company's Newport brand made record retail market share, taking more of the total domestic market and the menthol category. But profits were not as robust as hoped due to increased promotion costs and extra legal expenses, an ongoing cost of doing business for all cigarette makers.

There are several factors working against all cigarette companies: states are looking to cigarettes for added tax revenues, especially in these difficult economic times. As taxes increase, demand falls. Smoking restrictions continue to grow, with many cities now banning puffing even in outdoor areas. The economy itself slows down sales as the cost of a pack cuts too deeply into weekly budgets.

Some numbers: Market Cap is $13.11 billion. Trailing P/E is 13.36 while Forward P/E is 12.02. Price to sales ratio is 3.31. Operating margin for the last 12 months was 45.10% and Profit margin was 25.52%. Revenues were $3.96 billion. There's $2.11 billion in cash for $14.12 a share. Total debt is $1.82 billion. Current ratio is 2.20. Beta is .45. There are 149.61 million shares outstanding with a Float of 149.41 million. Insiders own .02% of the stock while Institutions have 98.80% of the Float. The dividend is $4.50 a share for a yield of 5.30%.

Lorillard has a cloud over its corporate headquarters in the form of the FDA. Until there is resolution on menthol cigarettes, it's hard to imagine the stock will go up from here. Yet only in the last week, the price is higher by $5. Watch the headlines for any news on the FDA's leanings as it will influence the stock price until the final resolution. In the meantime, a yield of 5.30% makes the wait a little easier.

- Company Web site: www.lorillard.com

- Ted Allrich