Altria Group Inc (MO), Reynolds American, Inc. (RAI), Lorillard Inc. (LO): 3 Companies You Won’t Want to Miss

Reynolds American, Inc. (NYSE:RAI)’s net income increased by 88% in the first quarter of 2013, due to higher prices and lower expenses in comparison to the previous quarter. Moreover, its earnings increased to $508 million from $270 million, year over year. Market share of its flagship brands, Camel and Pall Mall, also increased to 8.5% and 9%, respectively. The increase for Pall Mall was largely driven by smokers looking for affordable cigarettes. Reynolds American, Inc. (NYSE:RAI) promotes this cigarette as long lasting and affordable. Moreover, Reynolds American increased the prices of its cigarettes recently by $0.06 in June 2013, coming into effect on June 6. This increase will further result in increased profitability for the company in the upcoming years.

The company announced a $2.5 billion share-buyback program in 2011, in which Reynolds American, Inc. (NYSE:RAI) spent $300 million to buy 6.8 million shares during the last quarter. Looking at the growth of the company, it is expected to continue its share buyback program, as there is still $900 million worth of share buyback remaining.

Banking on e-cigarettes

Lorillard Inc. (NYSE:LO) acquired Blu eCigs last year for $135 million. In the first quarter of 2013, the total sales of Blu was $57 million, up by 46%, quarter over quarter. E-cigarettes contribute around 3.61% share in the total sales of the company. The company expanded in more than 50,000 stores for the sales of e-cigarettes since the acquisition of Blu eCigs. To get a competitive advantage, the company is also focusing on brand building by associating itself with motorsports teams and music concerts. This will confer long-term benefits on the company. Looking at the growth of the e-cigarettes market in the U.S., it is expected that e-cigarette sales will reach to around $83 million in the second quarter.

Some 90% of cigarettes produced by Lorillard Inc. (NYSE:LO) contain menthol, and there are concerns with FDA policies regarding menthol use in cigarettes. The Tobacco Products Scientific Advisory Committee, appointed by the FDA, suggested the use of menthol did not increase the individual risk of smoking-related problems. However, in June 2013, the FDA permitted Lorillard Inc. (NYSE:LO) to sell two cigarette brands, “Newport Non-Menthol Gold Box 100s” and “Newport Non-Menthol Gold Box”. Lorillard Inc. (NYSE:LO) is the only tobacco company to receive product clearance from the FDA, out of 500 requests. The company will benefit from this move, and it is estimated that overall earnings of the company will increase by 10.57% over last year.