Reynolds American (RAI) vs. Imperial Brands (IMBBY) Financial Review

Reynolds American (NYSE: RAI) and Imperial Brands (OTCMKTS:IMBBY) are both large-cap non-cyclical consumer goods & services companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, profitability, analyst recommendations, valuation and dividends.

Earnings and Valuation

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This table compares Reynolds American and Imperial Brands’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Reynolds American N/A N/A N/A $2.39 27.36
Imperial Brands $39.59 billion 0.81 $1.79 billion N/A N/A

Imperial Brands has higher revenue and earnings than Reynolds American.

Dividends

Reynolds American pays an annual dividend of $2.04 per share and has a dividend yield of 3.1%. Imperial Brands pays an annual dividend of $2.28 per share and has a dividend yield of 6.8%. Reynolds American pays out 85.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Imperial Brands has increased its dividend for 8 consecutive years. Imperial Brands is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Reynolds American and Imperial Brands’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Reynolds American 27.70% 16.91% 7.20%
Imperial Brands N/A N/A N/A

Insider & Institutional Ownership

46.3% of Reynolds American shares are held by institutional investors. Comparatively, 0.2% of Imperial Brands shares are held by institutional investors. 0.1% of Reynolds American shares are held by company insiders. Comparatively, 1.0% of Imperial Brands shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Risk and Volatility

Reynolds American has a beta of 0.4, indicating that its stock price is 60% less volatile than the S&P 500. Comparatively, Imperial Brands has a beta of 0.61, indicating that its stock price is 39% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations and price targets for Reynolds American and Imperial Brands, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Reynolds American 0 3 0 0 2.00
Imperial Brands 0 4 1 0 2.20

Reynolds American currently has a consensus price target of $64.00, indicating a potential downside of 2.14%. Given Reynolds American’s higher probable upside, analysts plainly believe Reynolds American is more favorable than Imperial Brands.

Summary

Imperial Brands beats Reynolds American on 8 of the 13 factors compared between the two stocks.

About Reynolds American

Reynolds American Inc. (RAI) is a holding company. The Company’s segments include RJR Tobacco, which consists of the primary operations of its subsidiary, R. J. Reynolds Tobacco Company; Santa Fe, which consists of the primary operations of its subsidiary, Santa Fe Natural Tobacco Company, Inc., and American Snuff, which consists of the primary operations of its subsidiary, American Snuff Company, LLC. The RJR Tobacco segment manages contract manufacturing of cigarettes and tobacco products through arrangements with British American Tobacco p.l.c. affiliates, and manages the export of tobacco products to certain United States territories, the United States duty-free shops and the United States overseas military bases. The American Snuff segment offers adult tobacco consumers a range of segregated smokeless tobacco products, primarily moist snuff. The Santa Fe segment manufactures and markets super-premium cigarettes and other tobacco products under the NATURAL AMERICAN SPIRIT brand.

About Imperial Brands

Imperial Brands PLC, formerly Imperial Tobacco Group PLC, is a fast-moving consumer goods company. The Company offers a range of cigarettes, fine cut and smokeless tobaccos, papers and cigars. The Company’s segments include Growth Markets, USA, Returns Markets North, Returns Markets South and Logistics. The Growth Markets segment includes Iraq, Norway, Russia, Saudi Arabia and Taiwan, and also includes Premium Cigar and Fontem Ventures. The Returns Markets North segment includes Australia, Belgium, Germany, the Netherlands, Poland and the United Kingdom. The Returns Markets South segment includes France, Spain and its African markets, including Algeria, Ivory Coast and Morocco. Its businesses include Tobacco and Logistics. The Tobacco business comprises the manufacture, marketing and sale of tobacco and tobacco-related products. The Logistics business comprises the distribution of tobacco products for tobacco product manufacturers.

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