British American Tobacco PLC (BTI.US) issued updated guidance on Tuesday, projecting that its 2026 performance will likely fall at the lower end of its mid-term targets. The company attributed this to regulatory pressures and intense competition in the U.S. vaping market, which offset strong growth in other segments of its business portfolio. Following the announcement, BAT's shares dropped nearly 4% in pre-market trading.
Despite the challenges, the tobacco giant—known for brands like Lucky Strike and Dunhill—reaffirmed its ability to meet 2025 targets and expanded its share buyback program from £1.1 billion to £1.3 billion (approximately $1.7 billion).
A key challenge for BAT has been the unregulated competition in the U.S. vaping market, where non-compliant products have flooded the $22 billion industry, eroding profitability. CEO Tadeu Marroco noted that regulatory crackdowns are beginning to yield benefits, with the U.S. vaping segment expected to stop dragging down its broader new-category portfolio—including the fast-growing oral nicotine pouch brand Velo—by next year. However, Marroco cautioned that about 70% of the U.S. vape market remains unregulated, making it unclear when the sector could become a growth driver. "We must remain prudent about our 2026 outlook," he said.
**Multiple Headwinds Weigh on Mid-Term Targets** Marroco highlighted additional pressures for 2025, including stricter tobacco regulations in Australia and ongoing investments in emerging product categories, which may temper profit growth. BAT’s latest guidance forecasts 2026 revenue growth at the lower end (3%-5%) of its mid-term range, with adjusted operating profit growth of 4%-6%. For 2025, both revenue and adjusted operating profit are expected to grow around 2%.
On a positive note, BAT anticipates accelerated double-digit revenue growth in its new-category business during the second half, driven by rising demand for nicotine pouches and gradual recovery in U.S. vaping.
Analyst Rae Maile of Panmure Liberum commented, "While BAT’s stock has surged 50% year-to-date, this guidance may disappoint investors." He noted that 2026 would mark the fourth consecutive year of conservative growth projections and suggested rival Imperial Brands (IMBBY.US) offers more attractive valuation and growth potential.
According to consensus estimates compiled by BAT, analysts expect 2025 revenue growth to average 2.1%.
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