Tobacco holding company Reynolds American Inc. (RAI: Quote) reported Tuesday a rise in second-quarter profit, reflecting mainly higher pricing, despite decline in net sales and cigarette volumes. On a per share basis, earnings beat analysts' expectations, while topline missed their view. The company also reaffirmed its adjusted earnings per share outlook for full year 2012.
Daniel Delen, president and chief executive officer of the company said, "RAI increased earnings and margin in the second quarter as our operating companies successfully navigated an intensely competitive environment. This performance rounded out a solid first half, and keeps us on track for full-year earnings growth in the mid- to high-single digits."
In the second quarter, the company's net income increased to $443 million or $0.78 per share from $327 million or $0.56 per share reported last year.
The company said its recent-quarter results included a charge of $0.01 per share related to Engle progeny lawsuits and special items.
Excluding items, adjusted earnings improved 11.3 percent to $0.79 per share, as higher cigarette and moist-snuff pricing, moist-snuff volume gains and productivity improvements more than offset cigarette volume declines. Adjusted earnings for the prior-year quarter was $0.71 per share.
On average, 13 analysts polled by Thomson Reuters expected the company to earn $0.76 per share. Analysts' estimates typically exclude special items.
Net sales for the quarter declined 4 percent to $2.18 billion from $2.27 billion in the same quarter last year, which also came below analysts' estimate of $2.24 billion.
The company's adjusted operating margin increased 2.4 percentage points to 34.2 percent.
Reynolds American has adjusted its prior-year figures to reflect change in method of recognizing actuarial gains and losses for pension and post retirement benefits.
The company also reaffirmed adjusted earnings per share guidance for 2012 in the range of $2.91 to $3.01, up 3.6 percent to 7.1 percent. Analysts expect the company to earn $2.95 per share.
This excludes the charge of $0.01 per share for the Engle progeny lawsuits, as well as the 2012 restructuring charge of $0.16 per share following completion of a comprehensive business analysis.
RAI is currently trading at $45.36, down 0.83 percent, on a volume of 448 thousand shares on the NYSE.
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by RTT Staff Writer
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