British American Tobacco Set for "Good Earnings Growth"


LONDON -- The shares of British American Tobacco (ISE: BATS.L) (NYS: BTI) slipped 13 pence to 3,150 pence in early London trade this morning, despite chief executive Nicandro Durante's claiming that the group is "on track for another year of good earnings growth."

His comments were made alongside a third-quarter trading statement, in which the FTSE 100 member revealed that underlying sales had improved 4% during the first nine months of the year. Durante added: "Economic recovery remains fragile this year and difficult trading conditions persist in many parts of the world. However, pricing remains strong, we are growing underlying market share and our Global Drive Brands continue to perform well."

BAT acknowledged that cigarette volumes had slid 1% to 512 billion during the nine months to the end of September, with higher sales in Bangladesh, Vietnam, Pakistan, and Saudi Arabia offset by decreases in Brazil, Japan, Italy, Turkey, and Egypt. This morning's statement also referred to industry sales remaining under pressure and illicit trade becoming a greater threat due to excise increases and lower consumer spending.

However, the firm noted that its four major brands continued to do well. Volumes of Kent were "slightly up," volumes of Dunhill and Pall Mall advanced 2%, and volumes of Lucky Strike jumped 14%. Volumes of fine-cut tobacco improved 8%.

Prior to today, City brokers expected BAT's earnings to improve from 195 pence to 208 pence per share during 2012, which in turn could help the dividend advance from 127 pence to 136 pence per share. Those forecasts equate to a near-term P/E of 15 and a forthcoming yield of 4.3%.

Finally, BAT remains an important part of the dividend portfolios controlled by equity income superstar Neil Woodford. This exclusive report -- "8 Popular Dividend Shares Held By Britain's Super Investor" -- reveals why the ace City stock-picker continues to hold tobacco shares. The report, which also showcases Woodford's other major holdings, is free to download today and comes with no further obligation.

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