Earnings guidance for British American Tobacco PLC (LSE:BATS) has been downgraded by analysts at Credit Suisse, which tempered their growth assumptions in the wake of worse-than-expected full-year results.
The Swiss bank's analysts noted BAT’s US volumes were weak, declining by 15% last year, leading to a lowering of expectations.
The analysts responded by reducing BAT's current year and 2024 earnings per share estimates by 2% and 4% respectively, reflecting higher finance costs and the absence of a share buyback for 2023.
They also lowered their target price for BAT to £39 from £40.
Despite this, the Credit Suisse analysts remain optimistic about BAT's future prospects, seeing a good profit growth story and compelling cash return story in the years ahead. They rate the FTSE 100-listed shares ‘outperform’.
Thee analysts also pointed out that the company's gross margin in the vapour segment has now reached 50%, and reckon the menthol ban in California does not pose a threat to the BAT business there.
BAT shares were changing hands for £31, up just under 2% on the day.
Of the 18 banks and brokerages following the stock, 15 are positive. The consensus share price target is £39.31 – a more than 20% premium to the current share price.