Lorillard Inc. reports 4Q earnings Monday; analyst eye menthol segment, cigarette volumes

Earnings Preview: Lorillard Inc.

RICHMOND, Va. — Lorillard Inc., the nation’s third-biggest cigarette company, reports its fourth-quarter results before the stock market opens Monday.

WHAT TO WATCH FOR: Any sign the maker of Newport cigarettes is losing market share loss among menthols or gaining in the discount segment — and any sign that cigarette volumes are rebounding from sharp drops in volume experienced industrywide in 2009 due to a federal tax hike.

Analysts believe the Greensboro, N.C., company continues to have the industry’s best outlook for profit margin, price per pack and volume.

Despite the Food and Drug Administration’s pending study on the public health impact of menthol, the segment continues to grow as the rest of the cigarette market shrinks. A scientific committee being organized by the FDA must study and issue a report on the public health impact of menthol cigarettes.

The top two U.S. cigarette companies — No. 1 Philip Morris USA, owned by Richmond, Va.’s Altria Group Inc., and No. 2 Reynolds American Inc., based in Winston-Salem, N.C. — are ramping up efforts to grab some of the menthol market away from Lorillard.

Lorillard is working to grow its Maverick discount brand as the weak economy and high unemployment have caused some consumers to switch to lower-priced brands.

WHY IT MATTERS: As demand for cigarettes continues to fall, any rebound in volumes could signal consumers are adjusting to April’s 62-cents-per-pack federal tax hike, which most cigarette makers accompanied with price hikes.

WHAT’S EXPECTED: Analysts polled by Thomson Reuters on average expect Lorillard to earn $1.51 per share on revenue of $1.23 billion.

LAST YEAR’S QUARTER: Lorillard reported profit of $1.53 per share on revenue of $1.09 billion.