British American Tobacco Shares Rise Amid 2024 Guidance

Shares of British American Tobacco (NYSE:BTI) (LON:BATS) saw a positive trading day on Wednesday as the company reaffirmed its full-year guidance for 2024, maintaining low-single-digit organic revenue and profit growth expectations.

In a pre-close trading statement, BAT emphasized a stronger performance in the second half of the year, supported by innovations in its New Categories portfolio and enhancements in traditional tobacco products across significant markets.

Analysts at RBC Capital Markets expressed that the shares likely reflect any potential upside from share buybacks.

The company’s outlook aligns with consensus forecasts, projecting a modest 1.1% rise in both organic sales and profits for 2024. BAT also forecasts a 2% decline in global tobacco industry volumes, a persistent challenge for the sector.

In the U.S. market, the company reported progress due to improved commercial strategies, adjustments in wholesale inventory, and pricing changes contributing to better performance in combustibles during the second half. Its U.S. volume share rose by 20 basis points, with additional gains noted in Africa, the Middle East, and Asia-Pacific.

New Categories, including reduced-risk products like vapour and heated tobacco, are pivotal to the company’s growth strategy.

While BAT revised net finance costs to £1.6 billion from £1.7 billion and lowered its foreign exchange impact projection to 1.5% from 2%, it has yet to confirm its share buyback plans of £700 million for 2024 and £900 million for 2025.

Looking ahead, BAT anticipates improved performance in 2025 following substantial investments. However, it warns that progress towards mid-term objectives of 3–5% organic revenue and mid-single-digit adjusted profit growth by 2026 may not be a straightforward path.

RBC analysts shared this cautious outlook, pointing out that the company's acknowledgment of a 'non-linear' growth trajectory indicates ongoing challenges.

For next year, consensus forecasts suggest a revenue growth of 1.5%, slightly accelerated from 2024, along with a minor 10-basis-point decline in EBIT margins.