Lorillard Inc. (NYSE:LO)
| Metric | Q1 2012 | Q2 2012 | Q3 2012 | Q4 2012 | Q1 2013 | YoY Change |
|---|---|---|---|---|---|---|
| Sticks Volume Sold | 9,441 | 10,628 | 10,070 | 10,012 | 9,781 | 3.60% |
| Net Income | $223 | $284 | $283 | $309 | $328 | 47.09% |
Figures in millions
Lorillard Inc. (NYSE:LO)’s sales volume continued to push higher as the company captured even more of the retail tobacco market. YoY the company’s sales grew 3.6% and excluding the first quarter, which was affected by one less shipping day.
Can investors profit from this?
Just by knowing that the tobacco industry is not in a rapid downward spiral, investors can look at tobacco stocks in a different light.
Of the companies listed above I believe the best bet would be Lorillard Inc. (NYSE:LO), which keeps increasing its volume of tobacco sold year after year. Then again the company is facing potentially devastating regulation from the FDA in regards to menthol cigarettes, which constitute about 80% of the company’s sales. Indeed, the possibility of menthol flavoring being banned by the FDA has been haunting Lorillard Inc. (NYSE:LO) for several years, however, the FDA’s new boss could soon bring the issue to a close and shutdown Lorillard Inc. (NYSE:LO).
Of the other tobacco companies, I favor a domestic seller such as Altria Group Inc (NYSE:MO) or Reynolds, as while Philip Morris International Inc. (NYSE:PM) is the go-to international tobacco company, it is exposed to volatile political situations around the world and a strong US dollar, which is the reason behind the company’s poor first-quarter results.
Based on that, my choice company here would have to be Altria Group Inc (NYSE:MO) for its diversification. The company has many additional income streams apart from tobacco. These include beer, in its holding of SABMiller, wine and many smoke-free tobacco products. In addition, the company’s leading product is the Marlboro tobacco brand, which is often seen as a more luxury product, with more brand loyalty and wider profit margins.
Overall
Despite popular opinion, sales of tobacco products do not seem to be falling as fast as many would believe and this should reassure tobacco investors.
For those investors thinking of buying into tobacco, they should look to Altria to provide them with the returns that they desire.
The article Tobacco Sales do not Seem to be Slowing Down originally appeared on Fool.com and is written by Rupert Hargreaves.
Fool contributor Rupert Hargreaves owns shares of Altria Group (NYSE:MO) and Lorillard. The Motley Fool owns shares of Philip Morris International. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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