6 Jan

Reynolds American’s Stock Rose on Creation of New Subsidiary

WRITTEN BY Gabriel Kane

Price movement of Reynolds American

Reynolds American (RAI) has a market capitalization of $66.6 billion. RAI rose by 3.0% to close at $46.57 per share as of January 5, 2016, following the creation of its new subsidiary, RAI Innovations Company.

The stock’s price movements on a weekly, monthly, and year-to-date (or YTD) basis are 0.63%, 3.8%, and 0.91%, respectively.

Reynolds American’s Stock Rose on Creation of New Subsidiary

At times, the stock broke the support of its 20-day and 50-day moving averages in fiscal 2015. Currently, RAI is trading 1.8% above its 20-day moving average, 1.1% above its 50-day moving average, and 13.8% above its 200-day moving average.

The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) invests 2.7% of its holdings in Reynolds American. The ETF tracks an equal-weighted index of large-cap US consumer staples stocks drawn from the S&P 500 Index. The YTD price movement of RHS is 13.5%.

Competitors of Reynolds American and their market capitalizations are as follows:

  • Philip Morris International (PM) — $136.1 billion
  • Altria Group (MO) — $114.8 billion
  • Vector Group (VGR) — $2.8 billion

New plans of Reynolds American

Reynolds American recently created a subsidiary, RAI Innovations Company. RAI Innovations is focused on the product development, innovation, and commercialization of next-generation vapor and nicotine products.

Carolyn Hanigan was appointed as the president of RAI Innovations. She has 20 years of experience of in consumer packaged goods companies, including Mars, Nestle, The Clorox Company, and Kraft Nabisco Foods.

Performance of Reynolds American in recent fiscal 3Q15

Reynolds American reported fiscal 3Q15 net sales of $3,161.0 million, a rise of 41.1% when compared to net sales of $2,240.0 million in fiscal 3Q14. Its adjusted net income and adjusted EPS (earnings per share) rose to $781.0 million and $0.55, respectively, in fiscal 3Q15, compared to adjusted net income and adjusted EPS of $505.0 million and $0.47, respectively, in fiscal 3Q14.

Some activities of Reynolds American in fiscal 3Q15 included the following:

  • A definitive agreement to sell the Natural American Spirit business outside the United States to JT Group for $5 billion
  • A vapor technology-sharing and licensing term sheet signed between RAI and British American Tobacco (BAT).

The company has projected an adjusted EPS of $1.94–$2.00 for fiscal 2016.

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