The 10-second takeaway
For the quarter ended June 30 (Q2), Reynolds American missed estimates on revenue and beat expectations on earnings per share.
Compared to the prior-year quarter, revenue shrank and GAAP earnings per share increased significantly.
Margins increased across the board.
Reynolds American booked revenue of $2.18 billion. The seven analysts polled by S&P Capital IQ expected sales of $2.24 billion on the same basis. GAAP reported sales were 4.0% lower than the prior-year quarter's $2.27 billion.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
EPS came in at $0.79. The 13 earnings estimates compiled by S&P Capital IQ predicted $0.76 per share. GAAP EPS of $0.78 for Q2 were 50% higher than the prior-year quarter's $0.52 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 48.9%, 250 basis points better than the prior-year quarter. Operating margin was 33.7%, 770 basis points better than the prior-year quarter. Net margin was 20.4%, 700 basis points better than the prior-year quarter.
Next quarter's average estimate for revenue is $2.17 billion. On the bottom line, the average EPS estimate is $0.79.
Next year's average estimate for revenue is $8.34 billion. The average EPS estimate is $2.96.
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 602 members out of 650 rating the stock outperform, and 48 members rating it underperform. Among 218 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 209 give Reynolds American a green thumbs-up, and nine 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 $42.27.
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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.