UPDATE 2-UST profit up, beats estimates

(Adds conference call, analyst comments, stock price, background, byline)

By Sarah Coffey

NEW YORK, July 26 (Reuters) - UST Inc. UST.N posted higher second-quarter profit on Thursday, beating analysts' estimates, on increased sales of wine and smokeless tobacco, and raised its full-year earnings forecast.

Net income climbed to $139.9 million, or 87 cents per share, from $134.6 million, or 83 cents per share, a year earlier.

Excluding restructuring and other charges, the company earned 90 cents per share, 5 cents above analysts' average forecast, according to Reuters Estimates.

"The categories we compete in are growing," Chief Executive Murray Kessler said on a call with analysts. "We continue to control costs and are returning all of our cash and more to our shareholders."

UST expects to deliver a 10 percent annual shareholder return over the long term, Kessler said.

But some analysts said they expected more from the company.

"It is encouraging to see UST's premium brands showing steady growth in recent quarters, but UST continues to underperform the overall smokeless tobacco category," Goldman Sachs analyst Judy Hong wrote in a research note.

USB analyst Nik Modi wrote in a research note, "We believe there are even more areas from which UST can extract cost savings and expect another upside announcement in the future."

UST said net can sales of its premium moist smokeless tobacco brands, including Copenhagen and Skoal, grew 1.5 percent in the second quarter, while net can sales of its lower-priced smokeless tobacco products, Husky and Red Seal, grew 8.6 percent.

Net wine sales grew 28.3 percent to $79.5 million, including total premium case sales of 1.2 million, up 19.5 percent.

SALES AND OUTLOOK UP

Total second-quarter sales rose 3.9 percent to $491.3 million, beating analysts' average estimate of $490.65 million.

UST said it expects full-year profit of $3.16 to $3.27 per share, with a target of $3.21 per share. Excluding one-time items, it expects $3.30 to $3.41 per share, with a target of $3.35, up 3 cents from its previous forecast.

Analysts' average forecast is $3.36 a share excluding one-time items, according to Reuters Estimates.