Reynolds Enhances Forward View

Reynolds American (RAI - Analyst Report), manufacturer of four of the top 10 best-selling cigarette brands in the United States , reported its third quarter results. The company reported earnings of $1.24, down 3.9% year over year.

Despite the strong performance of the Conwood business and market share gains of brands like Camel, Pall Mall and Grizzly, net sales declined 5.3% year-over-year to $2.2 billion.

The company’s cigarette shipment volume declined 11.0% due to wholesale inventory reductions associated with the Federal tax increase and also due to lower volume from the company’s non-support brands. During the quarter, industry cigarette volume declined 12.6%.

The company’s growth brands, Camel and Pall Mall , gained a strong cigarette market share of 2.1 percentage points, bringing their combined share to 12.7%. This drove the company’s total cigarette market share to 45%.

Camel, the company’s flagship brand, had a market share of 7.7%. The company’s smokeless Camel Snus products contributed another 0.1 percentage points on a cigarette-equivalent basis, which assumes that a tin of Camel Snus is equal to a pack of cigarettes.

Conwood, the company’s moist-snuff brand, also posted strong volume and market share gains. Conwood’s total moist-snuff shipment volume grew 3.9% in the third quarter, despite the negative effect of trade inventory adjustments. Conwood's moist-snuff volume growth continued to outpace the category, with an 11.7% third-quarter gain.

With a full quarter of the federal excise tax increase effect, the company believes to have a better understanding of how the increases are affecting volume and pricing. Based on these factors, and with the support of a strong first-half performance, the company has increased its guidance range.

Annual earnings are now expected to be in the range of $4.60 to $4.70 from $4.40 to $4.60 per share previously.