British American Tobacco PLC (LON:BATS) saw its shares top the FTSE 100 leader board on Thursday as the cigarette maker’s first-half results beat forecasts, helped as well by reports it would test launch its Eclipse tobacco heating product in the US market within the next 12 months.
BAT saw its sales jump by 57% to £11.64bn for the half-year to 30 June 2018, with profit from operations ahead 72.4% to £4.438bn, and its adjusted earnings per share (EPS) of 137.2p ahead of expectations.
The group – the world's second-biggest international tobacco company by revenue - said the numbers were boosted by its recent takeover of Reynolds American and came despite a slower market in Japan for tobacco heating products (THP).
The maker of Lucky Strike cigarettes said foreign exchange rates were a headwind of 8% in the first half of the year and are estimated to hurt sales by 5% to 6% for the full year.
Nicandro Durante, BAT’s chief executive said: “Despite the recent slowdown in the THP category in some markets, including Japan and South Korea, we remain confident of exceeding £1bn of reported revenue in NGP in 2018 as we expect a range of new launches to re-energise growth in THP in the second half of the year.
“We anticipate another good year of adjusted earnings growth at constant rates of exchange".
Meanwhile, a report on Reuters said BAT has received a "sUBStantial equivalence" clearance from the US Food and Drug Administration for an improved version of its carbon-tipped tobacco heating product called Eclipse, a major regulatory hurdle that the group said clears the way for it to test the product in the next 12 months.
In late morning trading, BAT shares were 5% higher at 4,172,5p.
In a note to clients, analysts at UBS repeated their ‘buy’ rating and 5,650p 12-month price target on BAT shares, pointing out that first-half EPS was 1.8% ahead of consensus forecasts, with strong market share and margin trends.
They said: ”We expect consensus estimates to remain unchanged to up slightly.”
-- Adds share price, analyst comment; US Eclipse launch report --