Analysts cut estimates on Reynolds American

NEW YORK—Several analysts cut their estimates on Reynolds American Inc. after the nation's second-largest tobacco company cut its full-year outlook and posted an adjusted first-quarter profit that missed expectations.

In a note to investors, Goldman Sachs analyst Judy E. Hong said the environment for cigarette makers has been a difficult one. However, she was optimistic that Reynolds' lower first-quarter profit of $1 per share would prove temporary, saying first-quarter cigarette consumption may have been tempered by the slowing economy.

Analysts had expected a profit $1.15 per share.

Hong maintained her "Neutral" rating but cut her price target on Reynolds to $62 from $67, implying she expects the stock to add 15 percent in the next 12 months.

She also cut her 2008 earnings forecast to $4.57 per share, from $4.82 per share. Analysts polled by Thomson Financial expect 2008 earnings of $4.83 per share, on average.

Similarly, Lehman Brothers analyst Michael Branca called the results "disappointing" in a report, adding that a prolonged period of lower volume for the cigarette industry may be looming given the likelihood of future federal cigarette taxes and more competitive pricing.

Branca cut his price target to $58 from $64 and lowered his full-year outlook to $4.45 from $4.83.

Shares of Reynolds closed on Wednesday at $53.85.

(This version corrects 1st and 2nd graphs to show quarterly profit instead of a loss.)

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