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Cigarette maker Lorillard (NYSE: LO ) reported an 18% jump in its second-quarter earnings on the back of higher sales of its Newport and Maverick brands. However, the company warned that its third quarter would be weaker than a year ago.
Lorillard said wholesalers stocked up too much, which will hurt its revenues and profits as the year rolls on. Meanwhile, rivals Altria (NYSE: MO ) and Reynolds American (NYSE: RAI ) both reported weak quarterly earnings because of lower volumes.
A look at the numbers
Revenues for Lorillard's quarter came in at $1.16 billion, up 12% from a year ago. The North Carolina-based cigarette maker leads the market for menthol cigarettes, and revenues were helped by sales of its lower-cost Maverick and Newport cigarettes.
Net income for the quarter rose to $291 million, up 11% year on year. EPS grew by 18%, to $2.05, helped by the company's repurchase of 4.5 million shares for $494 million during the quarter. Lorillard's U.S. wholesale shipments increased by 10% even as the industry saw a volume drop of 1.3%.
The Foolish bottom line
The tobacco industry has suffered falling volumes in recent times, and the industry faces an ongoing regulatory threat. It looks like the biggest draw here is the dividend, as is the case for other Big Tobacco players, but the company's cautious outlook for the oncoming quarter is likely to weigh on investors' minds. That's something to keep in mind as you consider this stock.