US Edition British American Tobacco
£24.01 -37p
Questor says HOLD
Yesterday's third-quarter results from British American Tobacco came in below market expectations, as volumes fell by 1pc to 526bn sticks. Volumes rose in Asia – but fell everywhere else.
"The challenging economic conditions, excise-driven price increases and high unemployment have led to some softening of our volumes," said Paul Adams, chief executive. "The recession's impact on consumers is still with us and shows no signs of abating."
There is still some momentum in the group's four key brands – Dunhill, Lucky Strike, Kent and Pall Mall – with growth of 8pc. However, some of this was down to Japanese customers stockpiling ahead of an increase in duty.
The shares are trading on a December 2010 earnings multiple of 13.8 times, falling to 12.6 next year. The current yield is 4.7pc. This is a premium to peer Imperial Tobacoo, which trades
on a September 2011 multiple
of 10.3 times.
The shares were first recommended as an income play on February 26 this year at £21.79 and they are now 10pc ahead compared with the FTSE 100, which is up 6pc.
The shares are now a hold, down from buy because of the slowdown, but the dividend looks rock solid.