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Since the start of the quarter, the Q2 growth rate has risen from -31.7% to -29.5%. (Data provided by Thomson Reuters)
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Tobacco companies Reynolds American and Philip Morris International posted higher-than expected quarterly earnings on Thursday and raised their 2009 forecasts, helped by price increases.
Philip Morris also benefited from some improvement in currency exchange rates, as the U.S. dollar, while still stronger than in the prior year, was not as strong as the maker of Marlboro cigarettes had anticipated.
The stronger dollar reduces the value of sales outside the United States, and Philip Morris International only sells outside the country.
Reynolds profit was also helped by consumers buying more of its lower-priced Grizzly brand.
Most U.S. tobacco companies raised prices in connection with a sharp increase in the federal tax on tobacco, although Reynolds said it had temporarily absorbed the tax increase on moist snuff.
A global economic downturn and higher cigarette taxes have led to concerns about consumers trading down to cheaper cigarettes or quitting altogether.
But Philip Morris cigarette shipments were flat in the quarter, and Reynolds said the combined market share of its Camel and Pall Mall brands had increased to 12.7 percent from 10.1 percent a year earlier.
Reynolds American
Reynolds American said second-quarter profit rose to $377 million, or $1.29 a share, from $364 million, or $1.23 a share, a year earlier.
Analysts on average looked for $1.16 a share, according to Reuters Estimates.
Reynolds said results were helped by price increases and wholesalers and retailers restocking inventories after cutting back on smokes on hand to avoid paying a tax on inventories in place on April 1, when the tax increase went into effect.
On Wednesday, Altria Group, the largest U.S. tobacco company, posted higher-than-expected quarterly profit as price increases and cost cuts helped offset falling U.S. cigarette volume.
Reynolds' sales fell 3.8 percent to $2.25 billion. Analysts on average forecast $2.27 billion.
For 2009, the company raised its earnings forecast to $4.40 to $4.60 a share, excluding trademark impairments, up from its previous forecast of $4.15 to $4.45 as it has a better sense of how the federal tax increase will affect its business. Analysts on average forecast $4.34 a share.
Reynolds American [RAI
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] shares were up 0.1 percent at $41.23 in early New York Stock Exchange trading.
Philip Morris
Philip Morris said second-quarter profit fell to $1.55 billion, or 79 cents a share, from $1.69 billion, or 80 cents a share, a year earlier.
Excluding one-time items, earnings were 83 cents a share, down from 87 cents a year earlier.
Analysts on average expected 77 cents.
The company said it saw some improvement in its performance in European Union countries, a region where it has suffered in the past.
Revenue, excluding excise taxes, fell 8.6 percent to $6.13 billion, hit by the weaker dollar.
The company raised its 2009 earnings forecast to a range of $3.10 to $3.20 a share from $2.85 to $3.00 on concerns over currency exchange rates.
Philip Morris [PM
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] shares were up 2.5 percent at $44.98.
Slideshow: A Dozen Fine Cigars
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Data is a real-time snapshot *Data is delayed at least 15 minutes