Lorillard Inc. (LO), currently awaiting its merger with Reynolds American Inc., said Friday sales grew 4.8% in the March quarter on higher volume.

Results beat Wall Street expectations, sending shares up less than 1% in midday trading. However, the company reported declining revenue in its electronic cigarette segment, as other cigarette producers create similar products.

Lorillard is in the process of completing a merger with Reynolds American in a complicated, four-company deal valued at about $25 billion. The combined company would control about a third of the U.S. cigarette market, which would make it No. 2 behind rival Altria Group Inc.

Both companies said the merger, which comes as cigarette volumes have been falling across the industry, is on track to close mid-year. Bucking the trend, the maker of Newport cigarettes reported a 3.1% overall increase in wholesale cigarette volume in the latest quarter. Lorillard's total market share increased 0.3 share points to 15.5%.

Lorillard's Blu, among the leading e-cigarette brands, is marked to be divested in the Reynolds deal. For the period ended in March, sales of electronic cigarettes were $28 million, down from $51 million a year earlier. The decrease was due mostly to competition from other companies.

Overall, the company posted earnings of $275 million, or 76 cents a share, up from $271 million, or 74 cents a share, a year earlier.

Excluding restructuring costs and other items, earnings were 82 cents a share, up from 69 cents a share in the prior-year period.

Sales increased to $1.67 billion from $1.59 billion.

Analysts had projected 77 cents a share in earnings and $1.18 billion in revenue.

Reynolds American on Friday said its revenue grew 6.3% in the March quarter due to higher pricing that offset declining volumes.

Write to Angela Chen at angela.chen@wsj.com

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