Reynolds American, Inc. (RAI) has been trading like a high flyer for the last few months, hitting a number of new all-time highs as investors shift into more conservative segments of the market. With a high industry rank and estimates on the rise, this Zacks #1 Rank stock is burning up the charts.
Company Description
Reynolds American, Inc., through its subsidiaries, manufactures and sells cigarettes and other tobacco products in the United States. The company was founded in 1875 and has a market cap of $24 billion.
With investors nervous about economic growth, dividend stocks have fallen into favor with investors. That dynamic and respectable Q3 results from late October have RAI trading at an all-time high.
Third-Quarter Results
Revenue for the period was down about 2% from last year to $2.2 billion. When excluding one-time charges related to legal expenses, earnings came in at 70 cents, up from 65 cents last year but 4% short of the Zacks Consensus Estimate calling for 73 cents.
Although cigarettes sales fell about 6.8% from last year, smokeless sales helped fill the gap, with sales up 7%.
Financial Profile
The company has used its earnings momentum to strengthen its financial profile, with total debt falling to $3.67 billion from $4.1 billion last year. Cash and short-term investments stand at $2.01 billion.
Estimates
We saw some decent movement in estimates off the good quarter, with the current year adding 14 cents to $2.78 while the next-year estimate added 15 cents to $2.95, a solid 6% growth projection.
But in spite of the recent gains, RAI still looks reasonably priced, trading with a forward P/E of 14X, a slight discount to the industry average of 14.7X.
12-Month Chart
On the chart, shares have hit a series of new highs over the last few months as investors shifted into more conservative segments of the market. Take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.
