Reynolds Profit Tops Analysts' Estimates on Prices

Source from:  Bloomberg 04/30/2009

April 29 (Bloomberg) -- Reynolds American Inc., the second- largest U.S. tobacco company, reported first-quarter earnings that exceeded analysts' projections after raising cigarette prices. Profit, excluding some items, was $1 a share, unchanged from a year earlier, the Winston-Salem, North Carolina-based maker of Camel and Pall Mall said today in a statement. Analysts anticipated 96 cents, the average of nine estimates in a Bloomberg survey. The company's R.J. Reynolds Tobacco Co. has raised cigarette prices twice since December, in anticipation of higher U.S. tobacco taxes. The tax increase required retailers and distributors to pay 62 cents for every pack of cigarettes they had in stock April 1, pushing down Reynolds' shipments in late March. "Pricing appears healthy," Judy Hong, a Goldman Sachs Group Inc. analyst in New York, wrote today in a note to clients. She rates Reynolds "neutral." Shipments declined 10.5 percent to 18.7 billion cigarettes, less than the 15.9 percent drop Hong predicted. Reynolds advanced 84 cents, or 2.1 percent, to $41.48 at 4 p.m. in New York Stock Exchange composite trading. The stock has increased by 2.9 percent this year. The company projected full-year profit of $4.15 to $4.45 a share, compared with analysts' expectation of $4.37, the average of 10 estimates compiled by Bloomberg. Reynolds's "pretty wide range of guidance" reflects uncertainty over how smokers will respond to price increases, Chief Executive Officer Susan Ivey told analysts today on a conference call. "It will be the next couple of months when we actually see these consumers' reaction to this tax increase." Net income fell to $8 million, or 3 cents a share, from $505 million, or $1.71, a year earlier, the company said. This year's figure included a trademark writedown of $453 million, or 97 cents a share, triggered by the tax increase and price changes. Enditem