Tobacco company Reynolds American, Inc. (RAI), which has agreed to acquire smaller rival Lorillard, Inc. (LO), on Friday reported a 7 percent increase in profit for the first quarter, reflecting higher sales across all segments as well as higher cigarette and moist-snuff pricing.
The results for the quarter beat analysts' expectations. Looking ahead, the company reiterated its earnings outlook for fiscal 2015.
The Winston-Salem, North Carolina-based maker of Camel cigarettes and Grizzly smokeless tobacco reported net income for the first quarter of $389 million or $0.73 per share, up from $363 million or $0.67 per share in the prior-year quarter.
The latest quarter's results included a one-time benefit of $0.08 per share from the 2003 Non-Participating Manufacturer or NPM adjustment claim, and charges of $0.15 per share for transaction-related and financing costs, tobacco-related and other litigation, and Engle progeny lawsuits.
Excluding items, adjusted net income for the latest quarter was $457 million or $0.86 per share, compared to $386 million or $0.72 per share in the year-ago quarter. On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.80 per share for the quarter. Analysts' estimates typically exclude special items.
The company noted that the latest quarter's adjusted earnings reflect higher cigarette and moist-snuff pricing, as well as the completion of the federal tobacco-quota buyout.
However, net sales for the quarter grew 6 percent to $2.06 billion from $1.94 billion in the same quarter last year. Analysts' consensus revenue estimate was $1.98 billion.
The company's R.J. Reynolds Tobacco segment generated sales of $1.61 billion, up 3 percent from the prior-year quarter. However, shipments were down 2.4 percent and cigarette market share declined 0.5 percentage points to 26.1 percent.
American Snuff sales grew 9 percent to $201 million. Moist-snuff volume grew just over 1 percent, while moist-snuff market share declined 0.2 percentage points to 34.5 percent. Grizzly shipment volume grew 0.6 percent, while market share was in line with the year-ago period at 31.6 percent.
Santa Fe sales increased 27 percent to $171 million. Natural American Spirit super-premium brand volume grew 23 percent, and market share rose 0.3 percentage points to 1.8 percent.
Looking ahead to fiscal 2015, Reynolds American reaffirmed its outlook for adjusted earnings in the range of $3.65 to $3.80 per share. Analysts expect the company to report earnings of $3.79 per share for the year.
Reynolds American agreed in mid-July 2014 to acquire Lorillard and its popular Newport menthol brand in a cash and stock deal valued at $27.4 billion.
Shareholders of both companies, Reynolds American and Lorillard, approved the merger transaction in January 2015. The company remains confident that the transaction will close by mid-2015.
RAI closed Thursday's trading at $74.24. In Friday's pre-market activity, the stock is up $1.06 or 1.43 percent to $75.30.
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