Market Overview

CLSA Upgrades Reynolds American To Outperform, Cites Attractive Valuation


Reynolds American, Inc. (NYSE: RAI) has a robust portfolio and several levers to drive earnings growth, CLSA’s Michael Lavery said in a report. He upgraded the rating on the company to Outperform, citing attractive valuation. The price target has been raised from $52 to $54.

Attractive Valuation

Reynolds American’s valuation versus that of Altria Group Inc (NYSE: MO) is near historical lows, analyst Michael Lavery pointed out. Reynolds American’s shares are currently trading at a 5 percent discount to Altria’s shares, as compared to the historical average of a 3 percent premium.

Lavery believes this discount is excessive, particularly given Reynolds American’s comparable to marginally better market share momentum, the Lorillard deal and solid price mix.

Retail Momentum

Reynolds American’s retail momentum is currently better than expected. The analyst wrote, “Premium-priced Newport and super-premium Natural American Spirit (NAS) continue to perform well, driving RAI’s share and price/mix gains.” Moreover, the company’s volumes are “roughly flat,” which is better than expected.

Expected Takeout

British American Tobacco PLC (NYSE: BTI), which owns a 42 percent stake in Reynolds American, could be interested in a complete ownership, Lavery mentioned. He added that a deal is most likely when Reynolds American’s stock is cheap.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for RAI

May 2017PiperJaffrayInitiates Coverage OnNeutral
Feb 2017Wells FargoDowngradesOutperformMarket Perform
Feb 2017JefferiesDowngradesBuyHold

View More Analyst Ratings for RAI
View the Latest Analyst Ratings


Related Articles (RAI)

View Comments and Join the Discussion!

Posted-In: CLSA Michael LaveryAnalyst Color Long Ideas Upgrades Price Target Analyst Ratings Trading Ideas

Latest Ratings

XPOJP MorganMaintains84.0
UPSJP MorganMaintains113.0
UNPJP MorganMaintains163.0
NSCJP MorganMaintains189.0
MCHPJP MorganMaintains100.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at