British American Tobacco (LSE: BATS) issued its interim management statement for the nine months to 30 September 2015 today emblazoned with the headline On Track For A Good Year.
Its easy to see why British Americans management is so upbeat about the companys performance. For the nine months ended 30 September, revenue grew by 4.2% at constant exchange rates and the volume of Global Drive Brands cigarettes sold by the company grew 7.2%.
That being said, the total number of cigarettes shipped by the group during the period decreased by 1.8% to 487bn, and after including the effect of exchange rates, revenue fell 6.5% for the period.
Nevertheless, despite these lacklustre figures, British American did continue to gain market share during the period. The groups market share in key markets increased by 0.4% during the nine months to the end of September.
British American has also continued to consolidate the global tobacco industry this year with the acquisition of TDR d.o.o, a tobacco company operating within Eastern Europe and Souza Cruz a Brazilian cigarette producer.
On track to meet targets
Todays upbeat trading update from British American shows that the business is on course to meet City forecasts for growth this year. The City is expecting the company to report earnings per share of 207.5p, down 1% year-on-year due to negative currency movements.
Excluding the impact of currency, British Americans earnings per share would be set to increase by 3% to 4% this year. Still, slowing earnings growth isnt expected to affect the groups dividend payout.
British Americans dividend payout is set to increase 5% this year. The companys shares currently support a dividend yield of 4.1% and trade at a forward P/E of 18.5.
Wider industry trends
As one of the worlds largest tobacco companies, British Americas results are indicative of broader industry trends, which is good news for shareholders ofImperial Tobacco (LSE: IMT)
Imperial has already got off to a good start to the year. For the nine months ended 30 June, the company reported that underlying net revenue had risen 14% year-on-year. Volume had increased by 10% during the same period. On a constant currency basis,group tobacco revenue increased 2% for the nine months to 30 June.
But once again, City analysts expect the strong pound to weigh on Imperials results for the full-year. Analysts have pencilled in earnings per share growth of 2% for Imperial this year.
However, double-digit growth of 13% is expected for next year as Imperial benefits from its cost reduction plan and the acquisition of US assets, which took place earlier in the year.
If British Americans results are anything to go by, Imperial is highly likely to meet these lofty growth targets.
Imperial is the cheaper of the two tobacco giants. Based on current City figures, Imperial trades at a forward P/E of 16.8 and yields 4.0%. After factoring in next years growth, Imperial is trading at a 2017 P/E of 14.8.
Slow and steady
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Rupert Hargreaves owns shares of Imperial Tobacco Group. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.