Key Morningstar Metrics for British American Tobacco
- Fair Value Estimate: GBX 4,350
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: Medium
What We Thought of British American Tobacco’s Earnings
British American Tobacco BATS successfully restored revenue and profit growth for its US business for the first time since 2022. In constant currency and excluding Canada, companywide revenue rose 2.1%, and adjusted operating margin was flat at 44%.
Why it matters: The company’s efforts to improve its competitiveness in reduced-risk products seem to be taking hold, especially in the US, where Velo Plus helped BAT expand its share of the fast-growing category to 18% from 11.6%.
- We think further premium launches of glo Hilo and Velo Shift are going to help improve its offering in heated tobacco and nicotine pouches, respectively. Meanwhile, vape innovations like Vuse Ultra and increased enforcement of illicit markets should help the beleaguered category.
- For 2026, the company expects to hit the lower end of its medium-term guidance of 4%-6% annual adjusted profit from operations growth. Tougher comparisons to a stellar 2025 for the US and continued headwinds in Asia Pacific, the Middle East, and Africa are likely to extend into 2026.
The bottom line: We maintain our fair value estimates on wide-moat BAT of GBX 4,350/USD 58 as the company reaffirmed its medium-term guidance through 2028, in line with our forecast before the earnings call of about 5%.
- Shares look fairly valued to us after rallying 30% over the past year as the market has come to recognize the improvements in BAT’s US business. We’d recommend investors wait for a more attractive entry point.
Key stats: Unlike wide-moat peer Philip Morris, which paused buybacks in 2026 to focus on deleveraging, BAT looks focused on capital return, with £1.3 billion in repurchases planned for the year. However, both companies continue to prioritize reinvestment in reduced-risk products.
