The 10-second takeaway
For the quarter ended March 31 (Q1), Reynolds American missed slightly on revenues and missed estimates on earnings per share.
Compared to the prior-year quarter, revenue contracted slightly and GAAP earnings per share dropped significantly.
Gross margins improved, operating margins expanded, and net margins shrank.
Reynolds American booked revenue of $1.93 billion. The seven analysts polled by S&P Capital IQ expected to see revenue of $1.97 billion on the same basis. GAAP reported sales were 2.9% lower than the prior-year quarter's $1.99 billion.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
Non-GAAP EPS came in at $0.63. The 13 earnings estimates compiled by S&P Capital IQ anticipated $0.65 per share on the same basis. GAAP EPS of $0.47 for Q1 were 22% lower than the prior-year quarter's $0.60 per share.
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
For the quarter, gross margin was 48.6%, 190 basis points better than the prior-year quarter. Operating margin was 32.9%, 180 basis points better than the prior-year quarter. Net margin was 14.0%, 370 basis points worse than the prior-year quarter.
Next quarter's average estimate for revenue is $2.25 billion. On the bottom line, the average EPS estimate is $0.77.
Next year's average estimate for revenue is $8.56 billion. The average EPS estimate is $2.94.
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 596 members out of 643 rating the stock outperform, and 47 members rating it underperform. Among 205 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 195 give Reynolds American a green thumbs-up, and 10 give it a red thumbs-down.
Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Reynolds American is hold, with an average price target of $41.55.
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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.