Seeking Alpha
All posts from Seeking Alpha
Seeking Alpha in Seeking Alpha - Read, Decide, Invest.,

Exit Lorrilard Before Earnings

By Parke Shall

Lorrilard (LO) is set to report on Wednesday before the market opens. LO is in the midst of a giant merger with former competitor Reynolds Tobacco (RAI). Leading up to this point, Lorrilard has significantly outperformed the S&P 500, gaining 39.5% in the last 12 months, versus the 16.6% that the S&P has gained.

LO data by YCharts

LO is expected to report $3.37 per share for the year on revenue of $5.05B and is expected to post $0.93 for the last quarter. This compares to a year ago EPS of $3.12 on revenue of $4.97B. We believe that LO will meet these numbers, but we don't really see a case for owning LO through the merger. Some of the risks that exist with investing in tobacco companies right now are as follows:

  • there's been a trend of consumers drifting away from tobacco
  • anti-tobacco commercials and marketing