Reynolds American Profit Tops Estimates; Lifts FY Guidance

(RTTNews) - Tobacco company Reynolds American Inc (RAI) on Tuesday reported a surge in second-quarter profit, driven by an 11 percent increase in sales as well as one-time gains. Earnings for the quarter topped Wall Street estimates while sales fell short of expectations.

Reynolds, which acquired Lorillard Inc and its popular Newport menthol brand, lifted the its earnings outlook for 2015 and also increased dividend as well.

"Reynolds American delivered excellent results in the second quarter, in addition to successfully completing the Lorillard acquisition and related divestiture," said Reynolds CEO Susan Cameron in a statement.

Reynolds, based in Winston-Salem, North Carolina, reported second-quarter net income of $1.93 billion or $3.38 per share, up from $492 million or $0.92 per share in the prior year.

Results for the quarter included a gain of $2.57 per share gain from the divestiture to ITG Brands.

Excluding items, adjusted earnings for the latest quarter were $1.02 per share, compared with $0.89 per share last year. On average, 10 analysts polled by Thomson Reuters expected the company to report earnings of $0.97 per share for the quarter. Analysts' estimates typically exclude special items.

Reynolds' sales for the quarter increased 11 percent to $2.40 billion from $2.16 billion a year ago. Six analysts had a consensus revenue estimate of $2.44 billion for the quarter.

Reynolds said its domestic cigarette volume increased 5.6 percent in the quarter.

At its key R.J. Reynolds Tobacco unit, which includes brands like Camel and Pall Mall, cigarette shipments rose 4.4 percent from last year, mainly driven by the inclusion of the Newport brand. The unit's market share edged down 0.1 percentage point to 31.8 percent on a pro-forma basis.

Sales growth was also seen across its smaller business divisions, American Snuff and Santa Fe, the company said.

For the fiscal year 2015, the company now expects adjusted earnings of $1.90 to $2.00 per share on a split-adjusted basis, from a prior range of $1.83 to $1.90 per share. On Monday, Reynolds' board approved a two-for-one stock split in the form of a special stock dividend.

Analysts currently expect the company to report 2015 earnings of $3.91 per share.

Reynolds said it expects to narrow the guidance range with the reporting of its third-quarter results.

Reynolds also announced a 7.5 percent increase in quarterly dividend to an annualized split-adjusted $1.44 per share.

Reynolds shares are trading at $81.90, up $2.71 or 3.42%, on the NYSE.