NEW YORK (TheStreet) -- Shares of Reynolds American (RAI) were falling 0.7% to $41.64 Tuesday after the Food and Drug Administration ordered the company to take four cigarette products off the market.
The FDA ordered the company to halt the sale and distribution of its Camel Crush Bold, Pall Mall Deep Set Recessed Filter, Pall Mall Deep Set Recessed Filter Menthol, and Vantage Tech 13 cigarettes.
The government agency said the four cigarettes do not meet a 2009 requirement that cigarette companies prove their newer products are similar to or substantially equivalent to products on the market as of February 15, 2007.
"The scientific basis for these four decisions include a failure to demonstrate that increased yields of harmful or potentially harmful constituents, higher levels of menthol, and/or the addition of new ingredients in the currently marketed products - when compared to the predicate products - do not raise different questions of public health," according to the FDA.
TheStreet Ratings team rates REYNOLDS AMERICAN INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate REYNOLDS AMERICAN INC (RAI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, compelling growth in net income, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 14.2%. Since the same quarter one year prior, revenues rose by 11.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 267.39% and other important driving factors, this stock has surged by 46.37% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Tobacco industry. The net income increased by 291.9% when compared to the same quarter one year prior, rising from $492.00 million to $1,928.00 million.
- The gross profit margin for REYNOLDS AMERICAN INC is rather high; currently it is at 55.93%. Regardless of RAI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RAI's net profit margin of 80.23% significantly outperformed against the industry.
- Net operating cash flow has slightly increased to -$632.00 million or 3.80% when compared to the same quarter last year. Despite an increase in cash flow, REYNOLDS AMERICAN INC's cash flow growth rate is still lower than the industry average growth rate of 41.46%.
- You can view the full analysis from the report here: RAI Ratings Report