Reynolds American Sees New Smokeless Products


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Reynolds American ( RAI ) is trying to make up for lost revenue in its cigarette business by creating new products (some aimed at women), shifting to premium brands and introducing smokeless alternatives, like electronic cigarettes.

It recently announced Vuse, an e-cigarette that uses smart technology to regulate the power, heat and cartridge performance that is supposed to deliver the perfect puff every time.

It manufactures some of the industry's best known brands, including Camel, Pall Mall, Winston and Kool, along with Doral and Salem.

Through subsidiaries, it also makes snuff and roll-your-own tobacco products.

The Winston-Salem, N.C.-based company has grown earnings per share for three straight years. Analysts are looking for 9% growth this year and 6% next.

In the past two quarters, earnings have grown 6% and 9%. Analysts are forecasting 7% growth to 81 cents a share in the next report.

Revenue growth has been flat lately. Out of the last 18 quarters, revenue has declined nine times. In the past two quarters, it was flat and grew 1%.

It has a five-year Earnings Stability Factor of 2 on a scale of 0 to 99 where low numbers correspond to stable earnings growth. It has a Relative Price Strength Rating of 55, meaning it has performed slightly better than the S&P 500 over the past year.

The dividend is 63 cents a quarter, which works out to a yield of 4.9%. The company has offered a dividend for 37 straight quarters going back to its IPO in 2004.

Since then, it has increased its dividend all the way from 23.75 cents, up 165%.

It has a return on equity of 29% and pretax margins of 32%. It carries a long-term debt-to-equity ratio of 96%.

The stock has been working on a cup-like pattern since topping at 52.93 on July 19.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance Investing Ideas
Referenced Stocks: RAI

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