Lorillard, Inc. (NYSE:LO) continues to offers investors steady double-digit EPS growth and a juicy dividend yield at a reasonable price.

The company also recently delivered better-than-expected Q4 results, prompting analysts to significantly increase their estimates for both 2012 and 2013. It is a Zacks #2 Rank (Buy) stock.

Company Description

Lorillard is the third largest cigarette company in the United States. It sells cigarettes under five brands: Newport (its flagship), Kent, True, Maverick and Old Gold. Lorillard was spun off from parent Loews Corporation in 2008.

The company is based in Greensboro, North Carolina and has a market cap of $17 billion.

Fourth Quarter Results

Lorillard delivered better than expected Q4 results on February 9. Earnings per share rose 26% over the same quarter in 2010 to $2.20. This was well ahead of the Zacks Consensus Estimate of $1.96.

Net sales rose 9% to $1.62 billion, driven by higher average prices and a 5.6% increase in total wholesale volumes.

Gross profit expanded from 36.2% of net sales to 37.9% while selling, general and administrative expenses fell from 7.1% of net sales to 6.7%.

These factors led to a stellar 17% increase in operating income.

Estimates Rising

Following strong Q4 results, analysts revised their estimates significantly higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate is now $8.92, representing 13% growth over 2011 EPS. The 2013 consensus estimate is currently $9.86, corresponding with 11% growth.

Analysts believe that Lorillard’s flagship Newport brand (which generates 90% of net sales) is well-positioned to continue taking market share in the U.S., along with its value Maverick brand. This should drive continued margin expansion, which, along with share buybacks, would drive double-digit EPS growth over the next few years.

Returning Value to Shareholders

Lorillard continues to reward its shareholders through stock buybacks and dividend hikes. In its Q4 press release the company announced a 19% increase in its quarterly dividend from to $1.55 per share. This equates to a juicy 4.8% dividend yield.

The company also spent $336 million in the fourth quarter buying back approximately 3.3 million shares.

Valuation

The valuation picture still looks very reasonable for LO. Shares trade at 14x 12-month forward earnings, in-line with the industry median.

The Bottom Line

With rising estimates, solid earnings growth, a 4.8% yield and reasonable valuation, Lorillard still offers a lot to like.

Read the October 17 article here.

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Equifax (NYSE:EFX) delivered strong fourth quarter results on February 8. Estimates have risen off the solid beat, sending the stock to a Zacks #2 Rank (Buy). Based on current consensus estimates, analysts project 12% EPS growth this year and 11% growth next year. This is in-line with management’s target EPS growth rate between 10-13% over the next three years. On top of this, the company pays a dividend that yields a solid 1.5%. Read the full article.

Bob Evans Farms, Inc. (NASDAQ:BOBE) delivered better-than-expected results for the third quarter of its fiscal 2012 on February 14. Estimates have been rising off the strong quarter, sending the stock to a Zacks #2 Rank (Buy). In addition to solid earnings growth, the company pays a dividend that yields a stellar 2.6%. Read the full article.

Todd Bunton is the Growth & Income Stock Strategist for and Co-Editor of the Reitmeister Value Investor.

 
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