We have descended our rating on Lorillard, Inc. from Outperform to Neutral on a weaker than expected first quarter 2012 results. Lorillard’s first quarter 2012 earnings of $1.74 per share dragged the Zacks Consensus Estimate of $1.99 per share because of top-line and margin decrease. Nevertheless, the first quarter profits leaded the prior-year quarter earnings of $1.71 per profit.
Quarterly incomes decreased 0.6% year over year to $1.526 billion, but exceeded the Zacks Consensus Estimate of $1.126 billion. Lower unit tobacco sales amount resulting from instabilities in the cigarettes trade inventory pattern during the quarter was partially neutralized the higher prices.
The company has been seen slow tobacco demand since the last few quarters. Further, governments around the world are enforcing restrictions on cigarettes makers for to reduce smoking habit in the respective countries in turn intensifying decrease in tobacco consumption across the world.
The Food and Drug Administration (‘FDA’) in America has passed a law that will oblige the tobacco companies to use scary pictures on the cigarette packages to avoid clients away from starting smoking. FDA plans to decrease the smoking rate by 213,000 in 2013.
Tobacco companies are banned to market their smoking products through promotion. Advertising of smoking products through television and even through radio has been banned since 1971.