Why Did Reynolds American’s 1Q16 Revenue Increase?
Reynolds American's Update on Developing Broad Brand Strategies
Reynolds American’s 1Q16 revenue highlights
Reynolds American’s (RAI) reported revenue increased by 41.8% to $2.9 billion in 1Q16 compared to $2.1 billion in 1Q15. The increase was primarily due to Reynolds American’s increased cigarette volume of 34.2% in 1Q16, largely driven by the addition of the Newport brand.
However, after beating the consensus estimates last quarter, Reynolds American’s revenue missed Wall Street expectations in 1Q16. The consensus has projected revenue of slightly over $2.9 billion.
Volume and market share
The total industry cigarette volume increased by 0.4% during the quarter. This was partly driven by improved economic factors and lower gas prices, which benefited the disposable income of adult tobacco consumers. After adjusting the wholesale inventory changes, industry shipments fell flat in 1Q16. However, total RAI’s domestic retail (XRT) market share increased by 0.3% to 34.6% in 1Q16.
Similarly, Altria Group’s (MO) 1Q16 net revenue of excise taxes increased by 6.0% to $4.5 billion. However, Philip Morris’s (PM) 1Q16 revenue excluding excise taxes fell by 8.1% to $6.1 billion. Excluding the adverse impact of foreign currency, net revenue increased by 2.4% in 1Q16. Vector Group’s (VGR) 1Q16 pro forma adjusted revenue also fell by 11.7% to $0.3 billion.
RAI’s peers British American Tobacco (BTI) and Japan Tobacco (JAPAF) (JAPAY) release their results on a yearly basis.
Revenue growth opportunities
Reynolds American’s (RAI) completion of Lorillard’s acquisition and related divestitures to Imperial Tobacco (ITYBY) and the integration of the Newport brand has helped RJR Tobacco to identify new revenue opportunities and expanded presence to drive further growth.
In addition, the vapor collaboration between RJR Tobacco and British American Tobacco (BTI) will facilitate RAI’s efforts to efficiently meet the preferences of adult tobacco consumers in a rapidly evolving marketplace.
In the coming parts of this series, we will focus on Reynolds American’s four operating segments’ 1Q16 revenue and income.
RAI comprises 0.9% of the WisdomTree High Dividend Fund ETF (DHS).
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