Reynolds American’s Stock Price Falls after 3Q15 Earnings



Reynolds American’s stock performance

Reynolds American’s (RAI) stock price fell after it released earnings. The stock price fell 2.3% to $48.35 on October 27, 2015, after the results were released.

Reynolds American’s stock has consistently seen upward movement since the beginning of 2015. However, the stock price fell 8.1% to $40.41 on August 24, 2015, from $43.98 on August 5, 2015. This was primarily due to the fall in global markets. Reynolds American has recovered since then and was trading at its peak of $49.49 on October 26.

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Peer stock price movement

Reynolds American’s stock is up 53.3% year-to-date (or YTD). The benchmark S&P 500 Index (SPY) (IVV) (VOO) is also up 1.5% year-to-date. Stock prices of Philip Morris International (PM), British American Tobacco (BTI), and Japan Tobacco (JAPAY) (JAPAF) also increased 10.2%, 12%, and 24.1%, respectively, year-to-date.

RAI’s stock has gained momentum due to its recent announcement of its asset sale to JAPAF for $5 billion on September 29, 2015. RAI is up 6.9% since then. To learn more about the deal, please read Japan Tobacco Buys Natural American Spirit’s International Assets.


On July 27, RAI’s board approved a two-for-one stock split. The stock split will be in the form of a special 100% stock dividend. During its second-quarter earnings release, RAI’s board also approved a 7.5% dividend increase to an annualized, split-adjusted $1.44 per share. The quarterly dividend was paid on October 1, 2015.

Repay debt

The company plans to repay ~$0.5 billion of debt that matures on October 30, 2015. For 3Q15, the company ended with $2.9 billion in cash balances. According to RAI’s CFO (chief financial officer) Andrew Gilchrist, the company’s focus remains on deleveraging as quickly and efficiently as possible while continuing to return excellent value to shareholders.

RAI has exposure in the PowerShares S&P 500 High Dividend Low Volatility ETF (SPHD), with 2.1%[1. Updated as on October 29, 2015] of the total weight of its portfolio.


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