Cigarette maker Lorillard Inc. said Monday its net income rose more than 16 percent as it sold more cigarettes at higher prices, beating Wall Street expectations and bucking the trend of declining cigarette volumes.
The maker of Newport, Maverick and True cigarettes reported net income of $274 million, or $1.81 per share, for the period ended Sept. 30. That's up from $235 million, or $1.44 per share, a year ago. Analysts expected $1.64 per share. Lorillard's earnings were helped by 14 cents per share because of a lower number of shares.
The nation's third-biggest tobacco company said revenue excluding excises taxes increased 12.6 percent to $1.07 billion. Analysts expected sales of $1.01 billion.
Lorillard is "having an outstanding year and as always we will stay focused on growing our business profitably, while at the same time navigating the many external issues that face our industry," CEO Murray Kessler, who took over in mid-September, said in a conference call with investors.
Lorillard's shares rose $1.65, or about 2 percent, to $85.70 in midday trading Monday.
Lorillard, based in Greensboro, N.C., said its cigarette volume grew 5.8 percent to more than 10 billion cigarettes on gains of 2.9 percent from its Newport menthol brand and increases of about 30 percent for its lower-priced brands such as Maverick.
Last week, rivals Reynolds American Inc. and Altria Group Inc. both reported selling fewer cigarettes.
The weak economy and high unemployment have caused many smokers to trade down to cheaper brands during the recession in a bid to save money. Lorillard's Maverick discount brand and Reynolds American Inc.'s Pall Mall cigarettes have been among the beneficiaries.
Most tobacco companies have been raising prices to keep profits up as the recession and declining demand cut into cigarette sales. Tax increases, smoking bans, health concerns and social stigma also have made the cigarette business tougher.
The company's market share increased 1 point during the quarter to 12.9 percent of the U.S. market. Newport's share of the menthol market grew 0.9 points to 35.9 percent of the market.
"Newport sells today almost the same number of sticks as it did 10 years, while during the same time, the industry has declined 27 percent," Kessler said.
Despite the Food and Drug Administration's ongoing study of the public health impact of menthol, the segment is stronger than regular cigarettes in a shrinking market. Lorillard's top competitors have ramped up efforts to grab some of those sales.
Lorillard, the oldest continuously operating U.S. tobacco company, spun off from Loews Corp. in 2008. It is the last of the country's top tobacco companies to report its third-quarter results.
Last week, Altria, owner of the nation's biggest cigarette maker _ Philip Morris USA _ said its net income rose 28 percent to $1.13 billion, partly because its costs fell and it enjoyed a tax benefit but also because higher cigarette prices more than made up for selling fewer smokes. Its volumes declined 2.4 percent.
Meanwhile, No. 2 Reynolds American said higher prices on cigarettes helped lift its third-quarter net income up 5 percent to $362 million, even though it sold fewer smokes than a year earlier. The number of cigarettes the company sold fell 2.6 percent.