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British American Tobacco PLC ADR BTI

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Morningstar’s Analysis

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British American Tobacco's Results Essentially in Line but Outlook Feels Underwhelming

Analyst Note

| Philip Gorham, CFA, FRM |

British American Tobacco reported full-year 2020 results essentially in line with our forecasts. We are reiterating our GBX 4,300 fair value estimate and wide moat rating. The stock remains materially undervalued, in our opinion, but a disparity is emerging in the long-term outlook between Philip Morris International, which dominates the heated tobacco category, and its competitors. While we think the cash flows from the core cigarette business are being underappreciated, we would prefer to see a bolder vision for migrating consumers to next generation products. 

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Company Profile

Business Description

Following the acquisition of Reynolds American, British American Tobacco is neck-and-neck with Philip Morris International to be the largest listed global tobacco company--slightly larger than PMI on net revenue, but slightly smaller on volumes. British American's Global Drive Brands are Dunhill, Kent, Pall Mall, Lucky Strike, and Rothmans, and it also owns Newport and Camel in the U.S. The firm also sells vapor e-cigarettes, including its Vype brand, heated tobacco, with Glo, as well as roll-your-own and smokeless tobacco products. The company holds 31% of ITC Limited, the leading Indian cigarette-maker.

Globe House, 4 Temple Place
London, WC2R 2PG, United Kingdom
T +44 2078451000
Sector Consumer Defensive
Industry Tobacco
Most Recent Earnings Dec 31, 2008
Fiscal Year End Dec 31, 2021
Stock Type
Employees 55,969