BAT Shares Surge on Strength in U.S. Business

British American Tobacco shares climbed nearly 3% after surpassing first-half profit forecasts and showing strength in its U.S. market. Though the company faces challenges due to consumers opting for cheaper alternatives and illegal vapes, investors were encouraged by its recovery in market share and strong performance in smoking alternatives.

British American Tobacco (BAT) shares rose almost 3% in early Thursday trade after the company exceeded first-half profit forecasts, catching investors' attention with positive developments in its U.S. business. Responsible for over 40% of its 2023 revenue, the U.S. market remains critical for BAT, primarily driven by tobacco sales.

Despite the uptick, the company battles with consumers turning to more affordable cigarette brands and illegal disposable vapes. BAT's e-cigarettes have suffered a market share loss due to this influx. However, Chief Executive Tadeu Marroco assured that the company has begun reclaiming ground, though challenges remain amid economic headwinds.

While Marroco conveyed skepticism about drastic changes in U.S. consumer behavior for 2024, he highlighted the importance of generating revenue from smoking alternatives. Tobacco investors emphasize transitioning away from traditional cigarettes as crucial, amidst tightening regulations and declining smoking rates. Rival Philip Morris International (PMI) appears ahead in this regard, boosting its profit forecast, partly due to its alternative products. Nonetheless, investors noted BAT's recovering market share and robust performance in nicotine pouches, as well as its growing smoking alternatives business.

(With inputs from agencies.)