British American Tobacco (BTI, Financial) shares fell 7.32% today, trading at $39.61. This decline contrasts with the broader market trend, as the S&P 500 index saw a 1.04% increase. The movement in BTI's stock price follows the company's release of its preliminary full-year results for 2024. While earnings slightly exceeded expectations, sales did not meet forecasts, and the guidance indicated potential challenges ahead.
British American Tobacco (BTI, Financial) reported an adjusted profit of 362.5 British pounds per share on sales of 25.87 billion pounds. Although analysts projected earnings of 362.2 pounds per share on sales of 26.11 billion pounds, the company's revenue increased by 1.3% year over year. This growth was primarily driven by an 8.9% increase in the new category segment. Notably, smokeless products contributed 17.5% of total revenue, with the addition of 3.6 million new customers, bringing the total customer base to 29.1 million. Revenue from cigarettes and other combustible products rose marginally by 0.1%, bolstered by a 5.3% pricing increase that offset a 5.2% decline in unit volumes.
The company announced a 2% dividend increase alongside a new stock buyback program. However, profitability was affected by a 6.2-billion-pound settlement in a Canadian legal case, raising investor concerns about future guidance.
For the current year, British American Tobacco (BTI, Financial) anticipates a 1% revenue growth and adjusted operating profit growth ranging between 1.5% and 2.5%. The company expects that new taxes in Bangladesh and Australia will negatively impact its combustible tobacco products. Looking ahead to 2026, it projects sales growth of 3% to 5% and adjusted operating profit growth of 4% to 6%.
Analyzing BTI's stock, the current price-to-earnings (PE) ratio stands at 22.84, with a price-to-book (PB) ratio of 1.29. The stock's GF Value is considered Fairly Valued, with a GF Value estimate of $36.75. Additionally, the forward dividend yield is notably strong at 7.49%, which is close to a 2-year low. Investor warning signs include a declining revenue per share and high price-to-sales (PS) ratio. On the positive side, the Beneish M-Score suggests the company is an unlikely manipulator, indicating robust financial health.
Despite these financial strengths, the stock's Altman Z-score of 0.85 places it within the distress zone, suggesting potential financial risks in the future. With a beta of 0.46, the stock exhibits lower volatility compared to broader market movements. Investors should consider these factors when evaluating BTI's stock performance and potential investment risk.
