🎈 Up Big Today: Find today's biggest gainers with our free screenerTry Stock Screener

Reynolds (RAI) Hits A 52-Week High Despite Brexit Jitters

Published 07/01/2016, 08:51 AM
Updated 10/23/2024, 11:45 AM
PM
-
MO
-
TSN
-
RAI
-

Shares of cigarette manufacturer Reynolds American Inc. (NYSE:RAI) rallied to a new 52-week high of $53.99 on Jun 30, recording a healthy year-to-date return of 16.86%. The company has been on the rise ever since it posted better-than-expected first-quarter fiscal 2016 results in Apr 2016. Further, the tobacco maker is benefiting from the renewed interest from investors seeking a safe haven in the tobacco sector amid the choppy global macroeconomic scenario.

Investors are also encouraged by the company’s positive outlook for 2016 coupled with its recent progress in the e-cigarette category.

What’s Behind the Rally?

The tobacco sector seems to be a relatively safe investment space in the wake of the financial market rout. Further, the company, with an all-American exposure, is insulated from the Brexit turmoil that is rattling the whole of Europe.

Another tobacco stock Altria Group Inc. (NYSE:MO) , with a vast exposure to America, gained post the Brexit episode. However, shares of Philip Morris International Inc. (NYSE:PM) , which has a significant presence in Europe, slumped following Brexit.

Generally, companies like Reynolds benefit from the addictive nature of their tobacco products. In addition, lower gas prices and an improving job scenario have increased consumer spending, which is doing the trick for these stocks.

Further, Reynolds reported decent first-quarter earnings on the back of higher pricing and strong performance of the core tobacco business and leading premium brands. The company also expects its business momentum to continue throughout the year.

Investors are encouraged by the company’s attempt to strengthen its presence in the growing e-cigarette category. Meanwhile, R.J. Reynolds Vapor Company, a subsidiary of Reynolds, has re-engineered and developed its own patented vapor technology and launched an e-cigarette brand Vuse. Being a “digital” cigarette, Vuse is installed with a proprietary computer chip that modulates its performance. The chip delivers consistent flavor which lends it an edge over other e-cigarettes. The brand is well received by customers and is generating substantial revenues for the company.

Zacks Rank & A Key Pick

Reynolds carries a Zacks Rank #2 (Buy). Another favorably ranked stock in the consumer staples sector is Tyson Foods Inc. (NYSE:TSN) with the same Zacks Rank as Reynolds.



TYSON FOODS A (TSN): Free Stock Analysis Report

ALTRIA GROUP (MO): Free Stock Analysis Report

PHILIP MORRIS (PM): Free Stock Analysis Report

REYNOLDS AMER (RAI): Free Stock Analysis Report

Original post

Zacks Investment Research

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.