British American Tobacco: The Best Of Big Tobacco?

Source from:  Seeking Alpha 06/14/2017

Summary

Strong product lineup and brands coupled with upcoming merger should continue to fuel BAT's success.

Favorable positioning in alternative cigarette products such as vaporizers and heat-not-burn.

A switch to quarterly dividend payments next year should generate even more interest amongst income investors.

Stock is fully valued; wait for a more attractive entry point.

While it's no secret that the tobacco industry has historically been a gold mine for investors, one company seems to continuously fly underneath the radar: British American Tobacco (NYSEMKT:BTI). Despite impressive performance, those within the SA community have shown little interest in the global behemoth. While its counterpart, Philip Morris International (NYSE:PM), garners most of the attention, BAT has arguably more attractive fundamentals and catalysts to propel it to future growth.

During full-year 2016, cigarette volumes at BAT increased 0.2%. Even with a volatile British Pound, constant revenue and profit rates were up 6.9% and 4.1%, respectively. Comparatively, Philip Morris reported less impressive results across the board: cigarette volumes declined 4.1% while constant revenue declined 0.4% and profit increased 0.9%. Despite both companies having faced significant currency fluctuations, British American Tobacco had an outstanding 2016. As reflected by volume, BAT is showing organic growth in an industry where it is hard to come by. Their four major brands, Pall Mall, Kent, Lucky Strike, and Dunhill are gaining popularity as consumers in emerging markets transition into higher end tobacco products.

Despite the numbers though, Philip Morris continues to garner a significantly higher valuation. Enditem