Can Shares In British American Tobacco plc Outperform Unilever plc, Diageo plc, Reckitt Benckiser Group Plc And Imperial Brands PLC After 2016 Results?

Are shares in British American Tobacco plc (LON:BATS) (LSE:BATS.L) a better investment than Unilever plc (LON:ULVR) (LSE:ULVR.L), Diageo plc (LON:DGE) (LSE:DGE.L), Reckitt Benckiser Group Plc (LON:RB) (LSE:RB.L) and Imperial Brands PLC (LON:IMB) (LSE:IMB.L)?

British American Tobacco plc
British American Tobacco plc

Shares in British American Tobacco plc (LON:BATS) (LSE:BATS.L) have fallen 0.3% after the release of its 2016 results to investors. However, in my view it was a good year for the company’s shares. Its cigarette market share in its Key Markets grew strongly and increased 50 basis points. This was helped by an improved performance by British American Tobacco’s Global Drive Brand portfolio, with volume up 7.5% and market share 100 basis points higher.

Group cigarette volume was 0.2% higher at 665 billion, with a 0.8% decline on an organic basis outperforming the wider tobacco industry. It declined by 3%, which I believe shows British American Tobacco’s strategy is working well.

The company’s revenue increased 6.9% at constant forex, while adjusted diluted earnings per share was 10.4% up at constant forex. Dividends per share increased 10% to 169.4p despite some challenging trading conditions persisting in key markets. I believe this shows the company has confidence in its future ability to build market share, which bodes well for its share price and investors.

I’m also optimistic about the progress being made on the deal to purchase the remainder of Reynolds which British American Tobacco does not own. Not only will this boost its market share, I also think it will provide it with greater economies of scale which could improve profitability in the long run and aid its development of reduced risk products.

In the last year, shares in British American Tobacco have risen 29%. That’s ahead of the share price performance of consumer stocks such as Unilever plc (LON:ULVR) (LSE:ULVR.L), Diageo plc (LON:DGE) (LSE:DGE.L), Reckitt Benckiser Group Plc (LON:RB) (LSE:RB.L) and Imperial Brands PLC (LON:IMB) (LSE:IMB.L). Reckitt Benckiser has risen 10%, Unilever’s shares are 22% higher, Imperial Brands has gained 1% and Diageo’s shares are 21% higher.

In my view, British American Tobacco has investment appeal for the long term. I think its shares will perform well on a relative basis, even though I’m optimistic about the outlook for Unilever, Reckitt Benckiser, Imperial Brands and Diageo. I think the deal with Reynolds is a good move and its relative strength in market share in 2016 stands its shareholders in good stead for the future.




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