Reynolds American Beats on EPS But GAAP Results Lag

Reynolds American (NYSE: RAI  ) reported earnings on Feb. 12. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Reynolds American met expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue was unchanged and GAAP earnings per share dropped significantly.

Margins shrank across the board.

Revenue details
Reynolds American reported revenue of $2.08 billion. The seven analysts polled by S&P Capital IQ expected revenue of $2.06 billion on the same basis. GAAP reported sales were the same as the prior-year quarter's.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.76. The 12 earnings estimates compiled by S&P Capital IQ predicted $0.73 per share. GAAP EPS of $0.25 for Q4 were 62% lower than the prior-year quarter's $0.65 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 45.5%, 460 basis points worse than the prior-year quarter. Operating margin was 13.9%, 2,100 basis points worse than the prior-year quarter. Net margin was 6.7%, 1,160 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $1.96 billion. On the bottom line, the average EPS estimate is $0.67.

Next year's average estimate for revenue is $8.41 billion. The average EPS estimate is $3.12.

Investor sentiment
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 595 members out of 644 rating the stock outperform, and 49 members rating it underperform. Among 210 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 200 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 $44.55.

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