Friday is the runt of the litter in terms of daily corporate news flow but this week we have a genuine big beast reporting: British American Tobacco PLC (LSE:BATS).
In spite of ever-fiercer pushback from investors and regulators for tobacco companies, the stock is the fifth-best performer in the FTSE 100 in 2022. There never will be a shortage, it seems, of people dying for a fag.
BATS’s strong performance this year is partly due to the gathering inflation narrative, according to analysts at AJ Bell.
“Tobacco is relatively price inelastic and despite bans on advertising and packaging in many markets producers still have brands which resonate with their customers. This means that tobacco firms may be better placed than most to defend margins and cash flow if inflation runs hotter than expected for longer than expected,” according to AJ Bell.
On top of that, chief executive Jack Bowles upgraded expectations for earnings at the first-half stage and in December announced cigarette volumes be flat rather than falling 1.5% as previously expected, and that group revenues would rise at least 5% on a constant currency basis, above the long-term target of 3% to 5% a year.
With £1bn in cost cuts achieved ahead of schedule of a targeted £1.5bn, BAT is expected to deliver adjusted earnings per share of 325.5p versus 331.7p a year ago.
A fourth-quarter dividend of 53.9p is also predicted, in keeping with management’s plan to pay 215.6p per share in dividends and distribute 65% of profits.
On the macroeconomic side of things, the first quarterly estimate of UK gross domestic product (GDP) covering the October – December period is due out.
“December's GDP report, released on Friday, likely will show that Omicron dealt a substantial blow to activity in the consumer services sector, but left the rest of the economy unscathed and sent the healthcare sector into overdrive,” speculated Pantheon Macroeconomics.
“We look for a 0.6% month-to-month fall in GDP, a tenth bigger than the drop expected by both the consensus and the BoE [Bank of England]. Our forecast implies that quarter-on-quarter GDP growth merely edged down to 1.0% in Q4, from 1.1% in Q3,” it added.
Significant announcements expected
Trading announcements: Tate & Lyle PLC (LSE:TATE)
Finals: British American Tobacco PLC (LSE:BATS)
AGMs: Mineral and Financial Investments Ltd, Polar Capital Global Healthcare Trust PLC (LSE:PCGH), Victrex PLC (LSE:VCT)
Economic data: GDP Preliminary (UK), U. of Michigan Confidence (Prelim) (US)