Wells Fargo Downgrades Reynolds American (RAI) to Market Perform; Pall Mall Fights To Defend Its Turf

Wells Fargo downgraded Reynolds American (NYSE: RAI) from Outperform to Market Perform, price target range cut from $41-43 to $38-40.

Wells analyst says, "We think Pall Mall may soon be under siege from heightened promotional activity among 2nd tier brands. Pall Mall is RJR's largest brand, so we believe that RAI has the most to lose as the 2nd tier category becomes more competitive. To maintain market share RJR will likely have to increase promotional support, which should pressure margins. Still, we think it will be challenging for Pall Mall to maintain recent growth rates, and we are reducing our volume growth forecast and EPS estimates as we think valuation is full. Therefore, we are downgrading our rating on RAI and our valuation range."

NOTE - this morning, Wells Fargo simultaneously upgraded Altria (NYSE: MO). To see details, Click Here

For an analyst ratings summary and ratings history on Reynolds American click here. For more ratings news on Reynolds American click here.

Shares of Reynolds American closed at $41.30 yesterday.

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