The tobacco giant,
Reynolds American Inc.
), is set to report 2Q13 results on Jul 24, 2013, before the
opening bell. Last quarter, it posted a 4.3% positive earnings
surprise. Let's see how things are shaping up for this
Why a Likely Positive Surprise?
Our proven model shows that Reynolds is likely to beat
earnings because it has the right combination of two key
Positive Zacks ESP:
Reynolds has an Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
) of +2.41%. It represents the difference between the Most
Accurate estimate (85 cents) and the Zacks Consensus Estimate (83
cents). This is a meaningful and leading indicator of a likely
positive earnings surprise for shares.
Zacks #2 Rank (Buy):
Reynolds carries a Zacks Rank #2 (Buy). Note that stocks with
Zacks Ranks of #1, 2 and 3 have a significantly higher chance of
beating earnings. The Sell rated stocks (#4 and 5) should never
be considered going into an earnings announcement.
The combination of Reynolds' Zacks Rank #2 (Buy) and +2.41%
ESP makes us very confident about a positive earnings beat on Jul
What is Driving the Better than Expected
Reynolds' product innovations and cost reduction initiatives
will help it to tide over the difficult economic conditions.
Therefore, we are expecting the company to post modest profit and
overall decent second-quarter results.
RAI's newly formed subsidiary - RJ Reynolds Vapor Company -
has re-engineered and developed a patented vapor technology and a
brand called Vuse. RAI launched the brand in two varieties - Vuse
Solo and Vuse System - in Colorado in Jun 2013.
We are encouraged by Reynolds' focus on the fast growing
e-cigarette category. E-cigarettes give the simulating effect of
cigarettes thereby helping those who want to quit smoking.
Moreover, the tobacco maker strictly manages its costs. The
business analysis completed by Reynolds recently in the fourth
quarter of fiscal 2012 has found productive ways to reduce cost
and channelize its resources. This is expected to boost profit in
the coming quarter.
Other Stocks to Consider
Here are some other companies you may want to consider as our
model shows they have the right combination of elements to post
an earnings beat this quarter:
Sanderson Farms Inc.
), Earnings ESP of +17.11% and a Zacks Rank #1 (Strong Buy).
Tyson Foods Inc.
), Earnings ESP of +13.79% and a Zacks Rank #2 (Buy).
Kraft Foods Group Inc.
), Earnings ESP of +5.97% and a Zacks Rank #2 (Buy).
KRAFT FOODS GRP (KRFT): Free Stock Analysis
REYNOLDS AMER (RAI): Free Stock Analysis
SANDERSON FARMS (SAFM): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis
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