British American Tobacco: No Change In Guidance After H1; 6.2% Dividend Yield

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

Summary

• British American Tobacco has maintained its 2022 guidance in its update, so EPS is still expected to grow mid single digits ex-currency.

• Macro headwinds and tough prior-year comparables mean industry volume outlook was cut globally and seen as uncertain in the U.S.

• BAT has overtaken Juul in U.S. Vapour, but has fallen further in Heated Tobacco in Japan and in nicotine pouches in the U.S.

• Competitive pressures will intensify from Philip Morris, though our base case is still one of relative stability in U.S. cigarette volumes.

• With BAT shares at 3,518.0p, we expect a total return of 45% (12.9%annualized) by 2025 year-end. The Dividend Yield is 6.2%. Buy.

Introduction

British American Tobacco p.l.c. (referred here as "BAT") released their H1 2022 pre-close update this morning (Thursday, June 9). BAT shares are down 1.4% in London (as of 1 pm local time).

Measured in GBP and including dividends, BAT shares have gained 57% (75% in USD) since we upgraded our rating to Buy in March 2020, and…