R.J. Reynolds Goes Light

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What a difference a few months can make. R.J. Reynolds (NYSE: RJR), producer of Camel, Winston, Salem, and other popular smokes, posted hot numbers for the first fiscal quarter of 2004.

When Alyce Lomax last gave us the skinny on the big tobacco outfit, the firm had reported a wider loss and was struggling mightily, as usual, to keep discounters and Altria Group's (NYSE: MO) Marlboro Man from bogarting the smoking public.

In fact, R.J. Reynolds lost over a point in market share for the quarter, but it didn't hold the firm back.

This morning's earning release shows flat revenues of $1.2 billion. Volume was down, but the company managed to move more of its higher-priced cigarettes to make up the difference. Earnings took a big 70% jump to $1.43 per share. Investors got more good news this morning when the firm settled a class action suit with tobacco growers.

The stock has been smoking all year, providing more than a double for folks who bought in last spring. And the ride may not be over yet, despite the soft sales. The company's cost-cutting is yielding even greater savings than expected, prompting R.J. Reynolds to raise its earnings guidance for the full year to a range near $5 per share.

That puts it on a forward P/E of around 12, within its historical norms. So, while it's not a screaming bargain, it is a leaner firm, with a history of copious free cash flow, much of which is paid out via the juicy 6% dividend yield.

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Fool contributor Seth Jayson owns no stake in any company mentioned above. View his Fool profile here.