British American Tobacco PLC is making steady progress in its shift away from cigarettes, with analysts at Jefferies saying the group’s next-generation product strategy is "on track".
In a note following last week's 2025 results, analysts described the FTSE 100 group as a "robust" operator in terms of combustible tobacco, which is transitioning successfully towards a smoke-free portfolio thanks in part to "category-leading momentum" in its US nicotine pouch brand Velo and trends in US vaping that are beginning to improve.
Jefferies nudged up its 2026 forecasts, now expecting organic sales growth of 3.4% and EBIT growth of 4.4% as profitability benefits from scaling newer categories.
Estimates for 'modern oral' (nicotine pouches) volume growth were lifted to 34.2% for 2026, reflecting strong US demand, though it trimmed e-vapour forecasts due to weakness in Poland and parts of Asia-Pacific.
In traditional cigarettes, improved US performance and strength in the Americas and Europe are helping to offset pressure in emerging markets, where excise taxes remain a drag.
The balance sheet is also strengthening, with the ratio of net debt to EBITDA expected to fall into the 2-2.5x target range by the end of 2026, which suggests there is "ample scope" for higher shareholder cash returns.
Jefferies models annual share buybacks of £1.3 billion beyond 2026.
Shares trade on 11.7 times 2027 earnings, a substantial 43% discount to Philip Morris International, which Jefferies believes "should narrow".