Reynolds American Inc. (RAI) reported first quarter adjusted earnings of $1.11 per share, beating the Zacks Consensus Estimate of $1.07 per share as well as last year’s profit of $1. The strong results were primarily attributable to higher pricing and moist-snuff volume as well as productivity initiatives. 
 
Reynolds’ net sales in the reported quarter grew by 3.4% to $2 billion from $1.9 billion in the year-ago quarter. The company’s adjusted operating income came in at $570 million, a growth of 3.6% over $550 million recorded in the prior-year quarter.
 
In terms of segments, R.J. Reynolds’ adjusted operating income was $470 million (up 2.4%) for the quarter. The growth was primarily driven by higher pricing, lower promotional expense and continued productivity gains, which more than offset the impact of lower cigarette volume and increased promotional expense. R.J. Reynolds’ total cigarette market share for the first quarter was 27.9%, up 0.2 share points from the year-ago period.
 
During the quarter, American Snuff’s adjusted operating income remained flat at $84 million, compared to the prior year quarter, as increased volume and pricing on Grizzly was fully offset by lower margins on Kodiak.
 
Reynolds’ ended the quarter with cash and cash equivalents of $3.3 billion and long-term debt of $4.1 billion, compared to $3.2 billion of cash and $4.5 billion of long-term debt in the year-ago period. During the quarter, the company contributed $300 million towards the pension plan.
 
Moving forward, Reynolds continues to expect adjusted earnings of $4.80 to $5 per share for 2010. The guidance is in line with the Zacks Consensus Estimate of $4.91 per share, which moved up a penny in just the past week as 3 of 11 covering analysts increased projections.
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