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What’s the Latest News on Reynolds American?

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Price movement

Reynolds American (RAI) has a market cap of $81.9 billion. It rose 3.1% to close at $57.68 per share on January 17, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 3.5%, 4.3%, and 2.9%, respectively, on the same day.

RAI is trading 3.3% above its 20-day moving average, 5.2% above its 50-day moving average, and 13.9% above its 200-day moving average.

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Related ETF and peers

The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) invests 2.6% of its holdings in Reynolds American. The YTD price movement of RHS was 1.0% on January 17.

The market caps of Reynolds’s competitors are as follows:

  • Philip Morris International (PM) — $143.5 billion
  • Altria Group (MO) — $133.4 billion
  • Vector Group (VGR) — $2.9 billion

Latest news on RAI

On January 17, 2017, Reuters reported, “British American Tobacco has agreed [to] a $49.4 billion takeover of US rival Reynolds American Inc., creating the world’s biggest listed tobacco company after it increased an earlier offer by more than $2 billion.

“BAT, which already owned 42 percent of Reynolds, will pay $29.44 in cash and 0.5260 BAT shares for each Reynolds share, it said, a 26 percent premium over the price of the stock on Octo. 20, the day before BAT’s first offer was made public.”

The report added, “BAT Chief Executive Nicandro Durante said bringing the two companies together would create a market leader with brands including Newport, Lucky Strike, Camel and Pall Mall.”

Performance in fiscal 3Q16

Reynolds American (RAI) reported 3Q16 net sales of $3.20 billion, a rise of 1.4% compared to net sales of $3.16 billion in 3Q15. Sales of the RJR Tobacco, Santa Fe, and American Snuff segments rose 0.80%, 21.6%, and 11.4%, respectively, between 3Q15 and 3Q16.

The company’s cost of products sold as a percentage of net sales fell by 730 basis points, while its operating margin rose by 940 basis points.

RAI’s net income and EPS (earnings per share) rose to $861 million and $0.60, respectively, in 3Q16, compared with $657 million and $0.46, respectively, in 3Q15. The company reported adjusted EPS of $0.61 in 3Q16, a rise of 10.9% over 3Q15.

Reynolds American’s cash and cash equivalents fell 26.1% between 4Q15 and 3Q16.

In the final part of this series, we’ll discuss Nike (NKE).

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