Earnings Preview: Reynolds American Inc.

Reynolds American Inc. reports its fourth-quarter and full-year results on Thursday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: The nation's second-biggest cigarette company, Reynolds sells Camel, Pall Mall and Natural American Spirit cigarettes and it owns American Snuff Co., which makes Kodiak and Grizzly brand smokeless tobacco.
Reynolds, based in Winston-Salem, N.C., said in October that tax increases and the tough economy cut the volume of cigarettes it shipped by 11 percent.
For the fiscal year that ended Dec. 31, Reynolds American forecast annual profit of $4.60 to $4.70 per share. Analysts on average predict earnings of $4.69 per share on $8.39 billion in revenue.
Last week, Richmond, Va.-based Altria Group Inc., owner of the biggest U.S. cigarette maker — Philip Morris USA, which sells Marlboro cigarettes, Black & Mild cigars and Copenhagen and Skoal smokeless tobacco products — reported that raising prices on cigarettes and cigars and cutting costs helped its fourth-quarter profit climb 7 percent even as cigar and cigarette volumes fell.
BY THE NUMBERS: For the fourth quarter, analysts surveyed by Thomson Reuters on average expect Reynolds American to post a profit of $1.11 per share on revenue of $2.07 billion. A year earlier, it earned 89 cents per share, on revenue of $2.18 billion.
ANALYST TAKE: Credit Suisse analyst Thilo Wrede wrote in a Jan. 19 that he expects Reynolds' promotion of Pall Mall to help offset declines in its other brands. Reynolds is promoting Pall Mall as longer-lasting and more affordable.
Wrede said Altria's promotion of Copenhagen Wintergreen smokeless tobacco could hurt Reynolds' Grizzly smokeless brand. Altria introduced Copenhagen Wintergreen in many states at prices lower than Grizzly sells for.
WHAT'S AHEAD: Wall Street will watch how growing scrutiny from the Food and Drug Administration, new federal marketing restrictions and the need to spend more on promotions affect tobacco companies.Reynolds joined Lorillard Inc. and smaller tobacco companies to sure the government over several of the new restrictions. A federal judge overturned two.
STOCK PERFORMANCE: During the fourth quarter, Reynolds shares rose 19.3 percent to $52.97. Over the last 52 weeks, the stock has traded between $31.55 and $55.15.