2010 Earnings Preview: Reynolds American Inc.

Source from:  The Associated Press 04/21/2010

Reynolds American Inc., the nation's second-biggest cigarette company, reports its first-quarter results before the stock market opens Thursday. WHAT TO WATCH FOR: Any rebound in cigarette sales volumes, which have declined industrywide at a steep pace in recent quarters as tax increases, smoking bans, health concerns and social stigma make the cigarette business tougher. The Winston-Salem, N.C., company has been aggressively promoting its Pall Mall as longer-lasting and more affordable cigarette as consumers weather a weak economy and high unemployment. Pall Mall saw large volume gains in recent quarters even as the company experienced overall declines. Reynolds also sells Camel and American Spirit cigarettes and Kodiak and Grizzly smokeless tobacco products. Last quarter analysts had questioned the company's strategy on Pall Mall because the number of cigarettes sold across all of its brands had declined and its profit didn't grow as much as some of its competitors. But the company defended the decision, saying they have been able to convert half of the smokers who try the brand. WHY IT MATTERS: Rebounding cigarette volumes could signal consumers are adjusting to April's 62-cents-per-pack federal tax hike, which most cigarette makers accompanied with price hikes. WHAT'S EXPECTED: Analysts polled by Thomson Reuters expect Reynolds American to earn $1.05 per share on revenue of $1.91 billion. LAST YEAR'S QUARTER: Reynolds American reported profit of $1.01 per share on revenue of $1.92 billion. Enditem