The 10-second takeaway
For the quarter ended Sep. 30 (Q3), Reynolds American missed estimates on revenues and met expectations on earnings per share.
Compared to the prior-year quarter, revenue dropped and GAAP earnings per share expanded significantly.
Margins expanded across the board.
Reynolds American notched revenue of $2.12 billion. The seven analysts polled by S&P Capital IQ wanted to see a top line of $2.18 billion on the same basis. GAAP reported sales were 3.8% lower than the prior-year quarter's $2.20 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 anticipated $0.79 per share. GAAP EPS of $0.74 for Q3 were 17% higher than the prior-year quarter's $0.63 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%, 110 basis points better than the prior-year quarter. Operating margin was 34.0%, 350 basis points better than the prior-year quarter. Net margin was 19.8%, 310 basis points better than the prior-year quarter.
Next quarter's average estimate for revenue is $2.10 billion. On the bottom line, the average EPS estimate is $0.75.
Next year's average estimate for revenue is $8.38 billion. The average EPS estimate is $2.96.
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 596 members out of 646 rating the stock outperform, and 50 members rating it underperform. Among 208 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 196 give Reynolds American a green thumbs-up, and 12 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 $44.91.
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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. The Motley Fool has no positions in the stocks mentioned above. 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.