uploads///Q EPS overview

Reynolds American: Reported Earnings Up by 591.7% in 1Q16


May. 20 2016, Published 11:34 a.m. ET

Reynolds American’s 1Q16 earnings highlights

Reynolds American (RAI) released its 1Q16 earnings on April 26, 2016. The quarter ended on March 31, 2016. The company’s adjusted diluted EPS (or earnings per share) rose by 16.3% to $0.50 per share in 1Q16. Revenue increased by 41.8% to $2.9 billion in 1Q16.

However, after missing expectations last quarter, Reynolds American’s 1Q16 earnings came in line with consensus Wall Street analyst estimates. The consensus had also projected diluted earnings of $0.50.

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Increase in adjusted EPS

Reynolds American’s adjusted earnings benefited from higher volumes and pricing across the board. Adjusted EPS excludes a charge of $0.11 per share for debt and financing costs, a charge of $0.01 per share primarily related to implementation costs following the Lorillard acquisition and related divestitures to Imperial Tobacco (ITYBY), as well as a gain of $2.11 for the divestiture of Natural American Spirit’s business to Japan Tobacco (JAPAY) (JAPAF).

Due to gains on the sale of Natural American Spirit’s business outside the US, its reported EPS increased by 591.7% from $0.36 in 1Q15 to $2.49 in 1Q16.

Earnings versus peers

Similarly, adjusted diluted earnings grew by 14.3% to $0.72 per share for Altria Group (MO) in 1Q16. Vector Group’s (VGR) diluted EPS came in at $0.16 in 1Q16. However, Philip Morris’s (PM) 1Q16 adjusted diluted earnings per share fell by 15.5% to $0.98 per share in 1Q16. However, excluding unfavorable currency of $0.19, the adjusted EPS rose by 0.9%.

EPS guidance

With the addition of the Newport brand in June 2015, the company expects Newport’s manufacturing integration to be completed by mid-2016. The company expects adjusted EPS guidance to be in the range of $2.25–$2.35 for the rest of the year. This represents an increase of 13.6% to 18.7% compared to last year’s adjusted EPS.

In the next part of this series, we will discuss Reynolds American’s 1Q16 revenue growth.

Reynolds American (RAI) makes up ~5.0% of the PowerShares DWA Consumer Staples Momentum Portfolio ETF (PSL).


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