UPDATE: Bank Of America Upgrades Reynolds American On Multiple Positive Factors

In a report published Wednesday, Bank of America analyst Lisa K. Lewandowski upgraded the rating on Reynolds American (NYSE: RAI) from Neutral to Buy, and raised the price target from $63.00 to $65.00.

In the report, Bank of America noted, “We have boosted our 2014/2015 EPS est by 2c/3c to $3.38/$3.66 respectively, due to slightly better cigarette price realization than prior ests (+4.3% vs. prior +3.9%e) and cigarette op. margins (+20bps/+30bps to 37.9%/ 38.9% in 2014/15). We have not factored in $266mn in pending MSA credits.

"We are lifting our PO from $63 to $65 given higher EPS ests and our belief that the factors discussed above will continue. At a 2015 P/E target multiple of 17.8x, we acknowledge that this is at the top of its historical norm. Risks to our PO are potential accelerated cigarette category declines, poor price realization, increased regulation, taxes, & litigation.”

Reynolds American closed on Tuesday at $59.26.