UPDATE 2-Reynolds Profit Disappoints on Weak Market Share

Source from:  Reuters 07/25/2011

(Repeats to add subscribers) * Q2 EPS $0.67 vs. Wall Street view $0.71 * Drop in cigarette volume steeper than Altria's * Shares down 4.7 percent (Adds analyst quote, market share, sales and profit forecast) By Eunju Lie CHICAGO, July 22 (Reuters) - Reynolds American Inc's (RAI.N) quarterly profit fell short of Wall Street expectations as it lost cigarette market share to Altria Group Inc (MO.N). Reynolds, whose shares fell nearly 5 percent in midday trading, posted a 4.4 percent drop in shipment volume to 19.4 billion cigarettes. Marlboro maker Altria's cigarette shipments fell 0.7 percent, the company said on Wednesday. A charge from a smoking cessation program in Louisiana and costs for plant closings also cut into profits. "[Reynolds] eased back on price promotions, which meant that the price gap between their discount brands and Altria's premium brands shrunk a little bit," said Morningstar analyst Phil Gorham. Nonetheless, market share for Camel and Pall Mall, Reynolds' leading brands, rose to 16.3 percent from 14.8 percent growth a year earlier. Reynolds' net income was $304 million, or 52 cents a share, in the second quarter, down from $341 million, or 58 cents a share, a year earlier. Excluding the charge from the Louisiana program and other one-time items, earnings were 67 cents a share, below the analysts' average estimate of 71 cents compiled by Thomson Reuters I/B/E/S. Net sales edged up to $2.27 billion from $2.25 billion a year earlier. Reynolds raised the low end of its full-year earnings forecast, excluding special items, to $2.62 to $2.70 per share from $2.60 to $2.70. Analysts were expecting a profit of $2.67 per share. Reynolds shares were down 4.7 percent at $36.70 in midday trading on Friday. Enditem