Shares of British American Tobacco experienced modest gains during Friday's early trading session in London, building on momentum from the previous day. The tobacco giant's stock price increased by 0.2% to reach 4,483 pence by 0914 GMT, extending Thursday's more substantial 3% advance that saw shares close at 4,473 pence.
Buyback Program Advances
The company disclosed in a regulatory filing that it purchased 97,709 ordinary shares on February 19 through Banco Santander, executing part of a buyback program originally announced in March 2024. These shares are slated for cancellation, reducing the company's total outstanding shares. According to the filing, BAT paid a volume-weighted average price of 4,400.8371 pence per share for the transaction.
This buyback activity represents a continuation of the company's strategy to return capital to shareholders while maintaining investment in strategic initiatives. The timing follows management's recent presentations at industry conferences where capital allocation priorities featured prominently in discussions with analysts.
Guidance Maintained at Lower End of Ranges
British American Tobacco maintained its financial outlook for 2026, though executives noted the company is tracking toward the lower end of its previously established target ranges. The guidance, expressed in constant currency terms to eliminate foreign exchange fluctuations, includes revenue growth of 3% to 5%, adjusted profit from operations growth of 4% to 6%, and adjusted diluted earnings per share growth of 5% to 8%.
The "adjusted" metrics exclude certain items not considered part of core business operations, providing investors with a clearer view of underlying performance. Management's commentary suggests the company faces headwinds in key markets that may limit its ability to reach the upper bounds of these projections.
Strategic Transformation Underway
Chief Executive Tadeu Marroco emphasized the company's ongoing transformation during his remarks at the Consumer Analyst Group of New York conference. "BAT is transforming, driven by our ambition to be a predominately Smokeless business by 2035," Marroco stated in prepared comments that highlighted the strategic shift away from traditional cigarettes.
The executive specifically identified the United States as a critical battleground market where regulatory developments and competitive dynamics significantly influence performance. BAT markets nicotine pouches under the Velo brand and vaping products through its Vuse line, positioning these offerings as growth drivers amid declining cigarette volumes.
Market Context and Analyst Sentiment
The tobacco sector faces particular challenges in the U.S. market, where regulatory scrutiny and enforcement actions against illegal vaping products create uncertainty for legitimate operators. BAT has consistently argued that stricter enforcement against illicit alternatives would benefit regulated market participants like itself.
Despite these challenges, Barclays maintained its "buy" rating on BAT shares with a price target of 4,900 pence, according to a MarketScreener report published Thursday. This represents approximately 9% upside from current trading levels, suggesting analysts see value despite the cautious guidance.
Risks and Considerations
Several factors could influence whether BAT achieves even the lower end of its guidance ranges. Regulatory developments remain a key variable, particularly if crackdowns on illegal vaping products prove insufficient or if authorities implement stricter controls on flavors, marketing, or product approvals. Additionally, a steeper-than-anticipated decline in traditional cigarette volumes would pressure overall results.
The company's performance in the U.S. market will be especially critical, given its significance to global profitability and the competitive intensity in reduced-risk product categories.
Dividend Calendar and Investor Implications
Income-focused investors monitoring BAT will note the company's upcoming dividend schedule. According to the published calendar, London-listed shares will trade ex-dividend on March 26, with the payment scheduled to reach shareholder accounts on May 7. This regular return of capital complements the share buyback program as part of BAT's comprehensive capital allocation approach.
The combination of modest share price appreciation, ongoing buybacks, maintained (if cautious) guidance, and continued dividend payments presents a mixed but fundamentally stable picture for investors in the tobacco giant as it navigates a period of significant industry transformation.
