Philip Morris International Inc. (PM), Reynolds American, Inc. (RAI), British American Tobacco PLC (ADR) (BTI): Three Tobacco Companies And Their Issues Ahead

British American Tobacco PLC (ADR) (NYSEMKT:BTI): Increasing revenue despite drop in cigarette sales

British American Tobacco PLC (ADR) (NYSEMKT:BTI) is the holding company of a group of companies which manufacture, market and sell tobacco products.

The company’s EPS of $6.42 with a 3% increase year over year is proof of British American Tobacco PLC (ADR) (NYSEMKT:BTI)’s decision to continue generating revenue. Management recently announced a 5% revenue increase in the first three months of the year, despite a 3.7% drop in cigarette volumes.

With a 13% of the world’s cigarette market share, British American Tobacco PLC (ADR) (NYSEMKT:BTI) is reinforcing its strong presence in the emerging markets, which represent 70% of its profits. As we know, these markets deliver superior growth compared to relatively mature markets such as Europe.

The company, through its progressive share repurchase program, is also committed to returning cash to shareholders. British American Tobacco PLC (ADR) (NYSEMKT:BTI) will return $2.4 billion to investors this year alone, compared to $2 billion last year and $1.1 billion in 2011.

Bottom line

Controlling 16.3% of the global cigarette market, Philip Morris International Inc. (NYSE:PM) has a strong portfolio of tobacco brands. In addition, its incursion in the alternative tobacco products market could help better position itself in a shifting and more regulated market.

Reynolds American, Inc. (NYSE:RAI)’ strong presence in new market segments and cost reductions initiatives are important. However, a drop in market share in premium brands such as Camel and Pall Mall represent a concern and make me remain neutral on the stock.

British American Tobacco PLC (ADR) (NYSEMKT:BTI) is solid and well-positioned in the emerging markets, which will ensure future earnings. But, it is lacking a proper acquisition and innovation strategy to help itself gain share in new market segments.

The article 3 Tobacco Companies And Their Issues Ahead originally appeared on Fool.com and is written by Vanina Egea.

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