UPDATE:Reynolds American 3Q Net Rises 5.2% As Revenue Improves

Reynolds American Inc.'s (RAI) third-quarter earnings rose 5.2% as revenue improved despite falling cigarette volume.

The results beat analysts' expectations and the company raised the low end of its 2010 earnings view.

Reynolds and larger rival Altria Group Inc. (MO) have diversified into smokeless tobacco for growth as cigarette sales continue to decline. Reynolds has shifted its focus to a few key brands and closed cigarette plants to consolidate production.

Reynolds American recently said Daniel Delen, the head of its largest subsidiary, will take over as chief executive next year as the tobacco company's current head retires. Susan M. Ivey, currently chairman and chief executive, has notified the board that she plans to retire on Feb. 28.

On a conference call, Delen said he and Ivey have worked together for some time and he isn't planning "any significant changes" to the company's strategy.

The second-largest U.S. tobacco company reported a profit of $381 million, or $1.30 a share, up from $362 million, or $1.24 a share, a year earlier. The latest quarter included 5 cents of charges. Revenue increased 4% to $2.24 billion.

Analysts polled by Thomson Reuters most recently forecast earnings of $1.34 on revenue of $2.2 billion.

Gross margin was flat at 47.1%.

Cigarette earnings increased 7.5% amid higher prices, though domestic volume dropped 2.6%. Total domestic market share was flat at 28.2%. However, combined share for its Camel and Pall Mall brands rose 3.2 percentage points to 15.8%.

At the American Snuff unit, which makes Grizzly- and Kodiak-brand moist snuff, earnings rose 9%. Total moist snuff volume was up 1.2%.

-By Anjali Cordeiro, Dow Jones Newswires; 212-416-2200; anjali.cordeiro@dowjones.com

(Tess Stynes contributed to this article.)

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