British American Tobacco (BATS, BTI) Extends £1.3bn Buyback and Reaffirms 2026 Guidance

British American Tobacco p.l.c. (LSE: BATS, NYSE: BTI) has packed a lot into December so far: a full‑year 2025 pre‑close trading update, an extended £1.3bn share buyback for 2026, and the sale of most of its stake in India’s ITC Hotels to cut debt. All of this lands after a huge rerating in 2025, raising the obvious question: after a 40–50% share price recovery, is BAT still an income bargain, or mostly “ex‑growth cash cow”?

Below is a rundown of the latest numbers, news and analyst forecasts as of 10 December 2025.

Share price snapshot: BATS in London, BTI in New York

On the London Stock Exchange, BATS closed around 4,33p on 10 December 2025, with bid/offer of 4,329p/4,330p. At that level, Hargreaves Lansdown data show: ^[1]

Market capitalisation: ~£94bn
Price/earnings ratio (P/E): ~11.8x
Dividend yield: ~5.4%

Over the last 12 months, the London line has climbed roughly 45%, trading in a 52‑week range of 2,838p to 4,426p, according to Investing.com. ^[2]

The U.S. ADR, BTI, last closed at $57.29 (9 December), near the upper end of its own 52‑week range of $34.82–$59.29 and up about 52% over the past year. ^[3] Intraday quotes on 10 December show BTI trading just above $57.

So this is no longer a beaten‑down “deep value” chart: BAT has already enjoyed a powerful rerating in 2025.

The big news: 2025 pre‑close update and 2026 guidance

On 9 December 2025, BAT released its Full Year 2025 Pre‑Close Trading Update, giving investors a clearer picture of how the year is shaping up and what to expect in 2026. ^[4]

Key points from BAT’s own guidance (at constant currency):

2025 revenue growth: about +2%
2025 adjusted profit from operations: about +2%
2025 New Category revenue growth (vapour, heated tobacco and modern oral): mid‑single‑digit for the full year, but accelerating to double‑digit growth in H2
Global tobacco industry volume expected to be down ~2%
Operating cash‑flow conversion >95% and capex of about £650m

Looking further ahead, management reaffirmed its “mid‑term growth algorithm” from 2026:

Revenue growth: +3–5% per year
Adjusted profit from operations: +4–6%
Adjusted diluted EPS: +5–8%

But there’s a nuance that the market didn’t love: BAT now expects 2026 to land at the lower end of that range, citing regulatory and competitive pressures, particularly in U.S. vapour. ^[5]

Market reaction

Reuters flagged that BAT shares dipped after the update, noting that investors focused on the comment that 2026 results would “scrape the lower end” of mid‑term targets, even as the company talked up U.S. momentum and smokeless growth. ^[6] GuruFocus similarly highlighted the modest 2% revenue and profit growth outlook for 2025 and the enlarged buyback. ^[7]

The message in plain English: BAT is promising slow but steady growth, not a rocket‑ship – but wants to make that look more attractive by returning a lot of cash.

£1.3bn buyback extended into 2026

The other headline is capital returns. Alongside the pre‑close update, BAT announced a £1.3bn share buyback for FY26, on top of its long‑running dividend programme. ^[8]

On 10 December 2025, RTTNews (via Nasdaq) reported that BAT has formally extended its buyback programme by up to £1.3bn for 2026, signing an irrevocable, non‑discretionary agreement with UBS to execute the next tranche during the closed period from 2 January to 11 February 2026. ^[9]

Management’s broader capital‑allocation plan:

Maintain progressive dividends
Keep cash‑flow conversion above 95%
Reduce leverage to 2.0–2.5x net debt / adjusted EBITDA by end‑2026
Layer buybacks on top of that deleveraging path ^[10]

For income‑oriented investors, this is catnip: high yield plus disciplined buybacks, funded by very strong cash generation.

Smokeless pivot: New Categories gain traction

BAT’s long‑term strategy is to “Build a Smokeless World” and become a predominantly smokeless business by 2035, with at least 50% of revenue from non‑combustible products like vapes, heated tobacco and modern oral nicotine pouches. ^[11]

The 2025 pre‑close update shows that pivot is gradually becoming financially meaningful:

New Category revenue is accelerating to double‑digit growth in H2 2025, driving mid‑single‑digit growth for the full year. ^[12]
Within smokeless:
- Velo Plus (modern oral) is on track for full‑year profitability, with triple‑digit revenue growth in the U.S. and strong share gains in total oral and modern oral in top markets. ^[13]
- Vuse (vapour) remains the category leader in tracked channels; H2 revenue trends improved as U.S. enforcement against illicit vapour products started to bite, although full‑year vapour revenue is still expected to be down high‑single‑digit. ^[14]
- glo (heated tobacco) is essentially flat on revenue, with competitive pressure in Japan and resources being shifted ahead of the premium glo Hilo launch across Japan, Poland and Italy. ^[15]

An August 2025 analysis by AInvest, drawing on BAT’s half‑year report, estimated that smokeless products already accounted for about 18.2% of group revenue in H1 2025, up from 2024, and highlighted rising contribution margins from New Categories as scale builds. ^[16]

The short version: combustibles still pay the bills, but smokeless is no longer a side project. BAT is slowly shifting its profit mix while trying to keep cigarette cash flow intact for as long as regulators allow.

Combustibles: slow decline, but still a cash machine

BAT expects global tobacco industry volumes to fall by about 2% in 2025, but continues to talk about “value over volume”: pricing and mix are offsetting some of the decline. ^[17]

From the pre‑close detail: ^[18]

Group value share in top combustibles markets is flat, with volume share down a marginal 10 basis points.
In the U.S., BAT’s largest market, value share is up ~20bps with flat volumes – and H2 performance in both revenues and category profit is improving.
AME (Americas & Europe) performance is described as “resilient,” supported by Brazil, Türkiye and Mexico.
APMEA (Asia Pacific, Middle East & Africa) is under pressure from tax and regulatory headwinds in Bangladesh and Australia, shaving roughly 1 percentage point off revenue growth and 2 points off profit growth, consistent with earlier guidance.

All of this slots into a familiar narrative: cigarettes are structurally shrinking, but BAT’s pricing power and brand portfolio are still strong enough to keep cash pouring in while smokeless is scaled up.

Debt reduction and portfolio clean‑up: the ITC Hotels sale

To help hit that 2.0–2.5x leverage target, BAT has been pruning non‑core holdings.

On 4–5 December 2025, Reuters reported that BAT planned to sell, and then successfully sold, more than half its stake in India’s ITC Hotels, offloading a 9% stake for about ₹38bn (~$425m) via an accelerated bookbuild. BAT’s holding drops from 15.3% to 6.3%. ^[19]

BAT inherited the stake when ITC Ltd spun off its hotels business earlier in the year. CEO Tadeu Marroco explicitly called the position “non‑strategic”, saying the move was part of a broader plan to reduce debt and exit non‑core assets. ^[20]

This follows an earlier sale of a sizeable stake in ITC Ltd itself, also framed as a debt‑reduction move. ^[21]

In other words, BAT is using today’s stronger share price and cash flows to reshape its balance sheet, rather than loading up on new unrelated ventures.

Dividend profile: still a high‑yield FTSE giant

Dividend‑hunters still see BATS as a cornerstone income stock.

On 13 February 2025, BAT declared an interim dividend of 240.24p per share for the 2024 year, payable in four equal quarterly instalments of 60.06p in May, August and November 2025, and February 2026. ^[22]
At today’s ~4,33p share price, that payout equates to a forward yield of roughly 5.5–5.6%, in line with Digrin’s 5.58% estimate and Hargreaves Lansdown’s 5.44% figure. ^[23]
Over the past three years, the dividend has grown by around 3% per year on average. ^[24]

Analysts frequently model BAT as a “bond‑plus” equity: low‑growth earnings, but high, reasonably covered dividends, with buybacks as a kicker. That’s still the story management is telling.

Analyst ratings and stock forecasts

The analyst community is… split, but tilting cautiously bullish.

London listing (BATS)

Investing.com’s consensus data for the London shares show: ^[25]

12‑month average price target: about 4,470p
Target range: 3,050p to 5,200p
Consensus rating: “Buy”
Recommendation breakdown: 7 Buy, 3 Hold, 2 Sell

With BATS at roughly 4,33p, that consensus target implies only modest upside of around 3%, suggesting analysts see the stock as fair value to slightly cheap rather than a screaming bargain.

One aggregation from StocksGuide, based on a broader set of 19 analysts, reports 12 Buy, 5 Hold and 2 Sell, and forecasts revenue of about $34.4bn for 2025, essentially flat versus 2024, edging to low‑single‑digit growth from 2026 onwards. ^[26]

U.S. ADR (BTI)

Coverage of the ADR is a bit more restrained:

MarketWatch lists an average recommendation of “Hold” with an average 12‑month target price of about $54.75 based on five analysts – actually below the current ~$57. ^[27]
Some niche data providers, like Intellectia, show a $62 price target from a single analyst, implying upside of around 8–9%. ^[28]

Morningstar, for its part, recently raised its fair value estimate for BAT and now describes the stock as “fairly valued”, highlighting improving U.S. performance. ^[29]

You also find strongly bullish takes: an AInvest AI‑driven article frames BAT as “undervalued relative to its long‑term potential”, pointing to robust free cash flow (£7.9bn in 2024, by its reading of BAT’s reports) and the growth of smokeless users. ^[30]

On the flip side, a recent valuation piece on Yahoo Finance’s platform concluded that, on its internal checklist, BAT only passes 2 of 6 valuation tests, implying that a lot of the undervaluation thesis has already been priced in after the 2025 rally. ^[31]

Netting it out, the consensus view seems to be:

Income investors: still attracted to the yield and buyback.
Value investors: divided on whether there’s much upside left after a 40–50% rebound.

Governance and management: CFO exit, interim continuity

Not all 2025 headlines were about buybacks and smokeless growth.

In August 2025, BAT announced that Chief Financial Officer Soraya Benchikh would step down with immediate effect, after only about 15 months in the role. Shares fell as much as 2.8% on the day. ^[32]

Reuters noted that the stock had gained more than 80% during her tenure, and quoted analysts from Panmure Liberum and JPMorgan calling the move “unfortunate” and “unexpected”, given Benchikh’s positive impact on financial discipline and the resumption of buybacks. ^[33]

Former interim CFO Javed Iqbal has stepped back into the interim CFO role again, while BAT searches for a permanent successor. ^[34]

So far, there’s no sign of a strategic U‑turn – the 2025 pre‑close update sticks closely to earlier messaging – but CFO turnover is a non‑trivial governance risk that some institutional investors will keep on their radar.

Regulatory and ESG overhang: Zambia controversy and beyond

If you’re wondering why an apparently cheap, cash‑rich consumer staple trades on a low‑teens P/E, regulation and ESG are a big part of the answer.

In November 2025, The Guardian reported that BAT’s Zambian subsidiary had lobbied government ministers to dilute or delay a tough new tobacco control bill, including proposals to: ^[35]

Reduce the size of graphic health warnings on packs
Remove broad restrictions on flavoured tobacco products
Soften penalties for law‑breakers

Health campaigners quoted in the article called this “utter hypocrisy”, noting that many of the measures already exist in UK law, where BAT is headquartered. BAT Zambia said it operates within local laws and supports regulation, but argued for rules tailored to local market conditions and illicit‑trade issues. ^[36]

Overlay that with:

Ongoing litigation risk, including Canadian settlements in recent years ^[37]
Potential future flavour bans and nicotine caps in key markets
Investor pressure to exclude tobacco from ESG‑labelled portfolios

…and you get a structural headwind to BAT’s valuation multiple, regardless of how well it executes operationally.

How 2025’s news reshapes the BAT investment case

Putting all of this together, the current picture of British American Tobacco stock looks something like this:

Financially solid, but only modestly growing
- 2025 revenue and profit growth guided at about 2%.
- 2026 expected at the low end of a modest 3–5% revenue / 4–6% profit / 5–8% EPS growth algorithm. ^[38]
Cash‑flow machine with big shareholder payouts
- Cash‑flow conversion above 95%.
- Dividend yield around 5½%, with small, steady increases. ^[39]
- £1.3bn buyback lined up for 2026, with a detailed execution plan already in place. ^[40]
Transformation on track, but not yet dominating the P&L
- New Categories growing faster again in H2 and moving towards profitability (Velo Plus already there). ^[41]
- Smokeless still a minority of revenue, though creeping up towards one‑fifth on some estimates. ^[42]
Valuation no longer screamingly cheap
- P/E ~11–12x and 5–6% yield look attractive versus many consumer staples, but less extreme than at the start of 2025. ^[43]
- Analyst price targets now cluster around current levels, with only modest upside implied, especially on the ADR. ^[44]
Risks are stubbornly structural
- Cigarette volumes in long‑term decline, even if pricing cushions the blow. ^[45]
- Regulatory and ESG issues – from Zambia’s draft law to ongoing WHO pressure – act as a permanent ceiling on valuation. ^[46]
- Management transition at the CFO level introduces some governance uncertainty. ^[47]

Bottom line: What does all this mean for BAT stock now?

From today’s vantage point – 10 December 2025 – BAT looks less like a classic turnaround play and more like a mature, high‑yield compounder with slow growth and heavy regulatory baggage.

For investors comfortable with the ethics and regulation of tobacco, the combination of ~5½% dividend yield, sizeable buybacks and low‑teens earnings multiple still offers a potentially attractive total‑return profile, especially if smokeless products keep gaining share and U.S. enforcement continues to weed out illicit competition. ^[48]
For those wary of long‑term disruption, litigation or ESG constraints, 2025’s rally and the new guidance may reinforce the view that most of the easy money has been made, leaving BAT as a solid but not spectacular income stock.

Either way, the latest flurry of announcements – pre‑close update, buyback extension, ITC Hotels stake sale – confirms that BAT is leaning hard into a “cash‑out while we transform” strategy: squeeze the legacy business, grow smokeless, pay down debt, and hand a lot of the surplus back to shareholders. Whether that’s enough depends on how you weigh cash today against the uncertainties of regulation, public health policy and shifting consumer habits over the next decade.