Market Overview

Why Tobacco Stocks Are Trading Down Wednesday

Why Tobacco Stocks Are Trading Down Wednesday

Tobacco and cigarette makers were trading mostly lower Wednesday morning after British American Tobacco PLC (NYSE: BTI) — the world's second-largest tobacco company —  issued a sales warning. 

What Happened

British American Tobacco said in a news release Wednesday that it expects global industry volume to be down by around 3.5 percent in 2019. The U.S. market is expected to see a volume decline of 4-5 percent due to a recent price increase and rising gas prices; the company said the U.S. industry volume decline is consistent with historic ranges.

Credit Suisse analysts were quoted by Reuters as saying continued declines in the cigarette category are "not a surprise." 

Why It's Important

Despite a guide for lower volume shipments, British American said it remains on track for constant currency revenue growth in the mid-to-upper half of its long-term guidance of 3-5 percent.

British American said its corporate value share has risen by 10 basis points year-to-date versus fiscal 2018 due to strong performance by its Strategic Combustible Brands — a group that includes brands such as Dunhill, Newport and Natural American Spirit and which has gained 50 basis points year-to-date.

What's Next

British American Tobacco said its "new categories" products like THP, vapor and modern oral are on pace to generate 30-50-percent constant currency revenue growth in the back half of the year. The company's deleveraging initiatives remain on track, with a goal of lowering adjusted net debt/adjusted EBITDA by around 0.4 times per year.

Price Action

Shares of British American Tobacco were trading lower by 3.88 percent at $37.39 at the time of publication Wednesday. 

  • Shares of Altria Group Inc (NYSE: MO) were lower by 1.11 percent. 
  • Shares of Philip Morris International Inc. (NYSE: PM) were trading lower by 0.12 percent.

Related Links:

Tobacco Stocks Trading Lower After Nielsen Data Shows Drop in Cigarette Sales

FDA Issues Guidelines for E-Cig Makers Seeking Approval Of Vape Devices


Related Articles (BTI)

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