Reynolds American (RAI) Stock Lower on Q2 Miss

Reynolds American (RAI) stock is down in pre-market trading Tuesday after the cigarette company reported earnings and revenue that fell short of expectations.
By Kaya Yurieff ,

NEW YORK (TheStreet) -- Shares of Reynolds American (RAI) are declining 0.11% to $52.25 in pre-market trading on Tuesday after the company reported weaker-than-expected earnings and revenue for the 2016 second quarter.

Before today's market open, the cigarette maker posted adjusted earnings of 58 cents per share, below analysts' estimates of 61 cents per share.

Revenue rose 33% to $3.2 billion year-over-year, but was lower than analysts' projections of $3.26 billion.

"Strong market share gains across our operating companies' premium cigarette portfolio, in combination with higher pricing in both cigarettes and moist snuff, drove excellent operating performance in the second quarter," CEO Susan Cameron said in a statement.

Total cigarette volume jumped 57.3% to 18.9 billion from last year. The company's Newport brand offset a 2.8% drop in Camel and a 5.4% decrease in Pall Mall volume, the Wall Street Journal noted.

During the quarter, the company finalized the transition of the Newport brand following its acquisition of Lorillard in June 2015.

For 2016, Reynolds American sees adjusted earnings per share between $2.26 and $2.34. Analysts are expecting earnings of $2.28 per share.

The company also announced a $2 billion share repurchase program.

Separately, TheStreet Ratings Team has a "Buy" rating with a score of A+ on the stock.

The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, expanding profit margins, good cash flow from operations and compelling growth in net income.

The team believes its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

You can view the full analysis from the report here: RAI

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