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British American Tobacco: Combustible Volumes Fell Double-Digits in U.S. & Europe

British American Tobacco: Combustible Volumes Fell Double-Digits in U.S. & Europe

(Preview) Company Update (BATS LN) (Buy)

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Librarian Capital
Feb 09, 2023
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British American Tobacco: Combustible Volumes Fell Double-Digits in U.S. & Europe
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Summary

  • British American Tobacco p.l.c.'s 2022 results this morning disappointed investors, with shares down 3% in London as of 2 pm local time.

  • Adjusted EPS grew by 5.8% in 2022 and New Categories revenues grew by double-digits, but the Combustibles business was weak.

  • Combustibles volumes fell double-digits in both the U.S. and Europe. Buybacks are paused while debt is paid down to a new target.

  • The company's progress in New Categories continued to be mixed, but an 8x P/E and a 7.7% Dividend Yield provide a margin of safety.

  • With shares at 2,999p, we expect a total return of 74% (24.3%annualized) by 2025 year-end. Buy.

Introduction

British American Tobacco ("BAT") released its full-year 2022 results this morning (February 9). Even though key headlines were already released in December in a "pre-close update," the full results were disappointing to investors, and the BAT share price is down 3% at 2,999p as of 2 pm local time.

BAT’s share price has been weak in the past year, with its U.K.-lis…

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