Wells Fargo weighs in on RAI’s share growth.
Reynolds American Inc.’s (RAI) second quarter Q2 adjusted earnings per share were $0.89 (+6% Y/Y), above analyst $0.87 estimates.
“RAI’s results were driven by retail share growth across all growth brands-Camel, Pall Mall, Grizzly and Santa Fe. Cigarette industry shipment volume was down -4.4% adjusted. RJ Reynolds generated strong cigarette pricing, up around 6%. RAI’s Vuse e-cig expansion is progressing well as Vuse now has 21,000 retail points of distribution and the next wave of distribution is scheduled for early September,” noted Bonnie Herzog, managing director of beverage, tobacco and convenience store research, Wells Fargo Securities LLC.
She added, “RJR’s growth brands appear to be on solid footing with share growth in Q2, Santa Fe and Grizzly, though slowing, took retail share. We remain very optimistic that Cameron will be able to lead RAI into its next generation of growth. We expect a modest positive reaction in the stock this morning and we reiterate our Outperform rating.”
Wells Fargo noted that Camel (vol -4.4%) took 0.4 points of retail share while Pall Mall took 0.1 retail share points, driving combined gains of +0.5 retail share points year over year for RAI’s growth brands. Grizzly continues to dominate the moist smokeless tobacco (MST) market. Despite flat volume, Grizzly gained +0.7 retail share points to 31.4%.
