British American Tobacco’s (BATS.L) higher revenue guidance is a sign its overhaul is working. The UK group reckons its 2021 revenue will grow more than 5% rather than between 3% and 5%, thanks in part to growth in products that carry less of a health risk.
This gets BAT closer to its 2025 goal of 5 billion pounds in revenue from products such as its Vype and Glo brands. Its revenue was 26 billion pounds last year, 1.4 billion pounds of which came from these newer products. Its ambitions are less lofty than those of Philip Morris International (PM.N), which wants 50% of its revenue to come from smoke-free lines. It was at 28% in the first quarter.
That helps explain why BAT’s valuation drags behind the Marlboro maker. According to Refinitiv data it trades on 8 times forward earnings, compared to 11 times for PMI. How much this narrows hinges on how BAT and PMI’s respective overhauls pan out. (By Dasha Afanasieva)