Reynolds American Earnings: Margins Shrink on Rising Costs, Net Income Falls

Reynolds American (NYSE: RAI) announced its results for the second quarter on July 22, 2011. Let's take a closer look at the company's industry, financials, and commentary and see what steps you can take next.

Earnings and Revenue:
Reynolds American fell short of EPS estimates, though the company's revenue fell in line with analyst estimates. The company reported EPS of adjusted net income of 67 cents/share versus the 70 cents/share estimate and revenues of $2.27 billion versus the $2.27 billion estimate. Revenue rose about 1% from the year-ago quarter.

Last quarter's falling profit ends a streak of three consecutive quarters of year-over-year profit increases. Year over year revenue increases in the past five quarters have averaged 0.9%. Reynolds American's revenue has now risen for two straight quarters. In the first quarter of 2011, revenue increased 0.3% to $1.99 billion from the year earlier quarter.

Income:
For the year, Reynolds American reported net income of $2.54 per share. The company fells short of analysts projections of $2.57. According to the reported number, the company's income fell 10.9% from last year's levels.

Conference Call:
The conference call for second quarter earnings can be accessed here.

Official Comment:
"Reynolds American delivered solid second-quarter performance given the challenging competitive and economic environment, with further gains in its operating companies' key cigarette and smokeless brands," said Daniel M. Delen, RAI's president and chief executive officer. "These results demonstrate the fundamental strength and resilience of our businesses, even as we focus on building innovative platforms for future growth," he said. "Based on our first-half results, RAI has tightened its earnings projections and is on track to deliver mid- to high-single digit adjusted EPS growth for the full year."

Industry:
With price/earnings growth of 1.6%, Reynolds American's industry, tobacco, is expanding. The company's EPS compares unfavorably with its industry's estimated average of $3.99.

What to Do Next:
Those are the latest numbers from Reynolds American, including how the announcement compared to Wall Street estimates. Benzinga consistently provides earnings previews and recaps for major corporate events. Be sure to visit us next quarter for a full Reynolds American preview.

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