BRITISH AMERICAN TOBACCO (BATS) – Consumer
| Price: £41.26 -4.4% | P/E: 12.6x |
| Market Cap: £90.4bn | Yield: 5.7% |
Cigarette and vape-maker BATS posted an upbeat pre-close trading statement for the year to December forecasting 2% revenue growth and an increase in operating profit as well as unveiling a new £1.3 billion share buyback.
US revenue and profit momentum remains strong, helped by a crackdown on the sale of illegal vapes which benefitted its branded products, as well as steady combustibles (cigarette and tobacco) demand.
The forecast for 2026 is more of the same – low single-digit revenue growth against a backdrop of falling tobacco sales, driven by mid-single digit new product revenue growth, and low single-digit operating profit growth.
Our View
After a 50% gain year-to-date some profit-taking isn’t unreasonable, and could actually be healthy, so today’s market reaction doesn’t phase us unduly.
A rising dividend and more buybacks are grist to the mill for income investors, and many would be quite happy to see a pull-back to buy more shares.
Disclaimer: The author (Ian Conway) owns BATS shares.
Read the press release here: https://www.bat.com/investors-and-reporting
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