Reynolds American Q2 Adj Profit Tops View, But Revenues Miss, Backs 2013 Outlook

(RTTNews) - Tobacco company Reynolds American, Inc. (RAI) reported Wednesday a profit for the second quarter that increased 4 percent from last year, reflecting higher cigarette and moist-snuff pricing, and improved operating margins.

Adjusted earnings per share topped analysts' expectation, while quarterly sales missed their estimates by a whisker. The company also reaffirmed its earnings forecast for full-year 2013.

"Second-quarter growth in Reynolds American's earnings and margins reflected strong performance across all of our reportable business segments. Profits increased at RJR Tobacco, American Snuff and Santa Fe, and their powerful key brands delivered solid market-share gains," President and CEO Daniel Delen said in a statement.

The Winston-Salem, North Carolina-based maker of Camel cigarettes and Grizzly smokeless tobacco reported net income of $461 million or $0.84 per share for the second quarter, higher than $443 million or $0.78 per share in the prior-year quarter.

Excluding items, adjusted net income for the latest quarter was $462 million or $0.84 per share, compared to $449 million or $0.79 per share in the year-ago quarter.

On average, 10 analysts polled by Thomson Reuters expected the company to report earnings of $0.83 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter remained relatively flat with last year at $2.18 billion, and missed seven Wall Street analysts' consensus revenue estimate of $2.19 billion by a whisker.

The company's R.J. Reynolds Tobacco segment generated sales of $1.79 billion, down from prior-year quarter's sales of $1.83 billion. Shipments were down 6.0 percent, and cigarette market share declined 0.3 percentage points to 26.0 percent. In its brands, Camel market share was up 0.4 percentage points at 8.7 percent, and Pall Mall market share rose 0.4 percentage points to 8.9 percent.

American Snuff sales grew to $194 million from $172 million last year. Moist-snuff volume increased 9.4 percent, and moist-snuff market share increased 0.7 percentage points to 33.1 percent. Grizzly shipment volume also grew 10.6 percent, and market share was up 1.0 percentage points to 30.0 percent.

Santa Fe sales increased to $149 million from $129 million in the year-ago quarter. Natural American Spirit super-premium brand volume jumped by 14.6 percent, and market share edged up 0.3 percentage points to 1.4 percent.

The company's adjusted operating margin strengthened further in the second quarter, increasing 2.4 percentage points, to 36.6 percent from last year.

Looking ahead to fiscal 2013, Reynolds American reaffirmed its adjusted earnings guidance range of $3.15 to $3.30 per share. Street is currently looking for full-year 2013 earnings of $3.22 per share.

The company noted that it remains focused on building new platforms for growth to meet the changing preferences of adult tobacco consumers in its efforts to transform the tobacco industry.

"At R.J. Reynolds Vapor Company, the expansion of the company's highly differentiated VUSE e-cigarettes is now under way in Colorado, and we will continue to expedite VUSE's expansion within this exciting new category," Delen added.

In Wednesday's regular trading session, RAI is currently trading at $50.78, down $0.03 or 0.06% on a volume of 0.40 million shares.