Trump's FDA Pressure Could Benefit British American Tobacco
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 30 2025
0mins
Should l Buy BTI?
British American Tobacco (BTI) saw a price increase of 4.19% as it reached a 20-day high amid broader market declines.
The recent news indicates that President Trump is pressuring the FDA to expedite the approval of flavored vapes, which could significantly benefit major tobacco companies, including BTI. If approved, flavored vapes could attract younger consumers, aligning with Trump's campaign promises. However, the FDA may limit approved flavors to those deemed more adult-oriented, which could impact product variety in the market.
This potential regulatory change could enhance BTI's market position and sales, especially if flavored products gain traction among consumers.
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Analyst Views on BTI
About BTI
British American Tobacco p.l.c. is a global multi-category consumer goods business company. The Company provides tobacco and nicotine products. Its segments include the United States, Asia Pacific Middle East and Africa, and Americas and Europe. Its product categories include Vapor, Heating Products (HPs), Modern Oral, Traditional Oral, and Combustible cigarettes. Vapor products are handheld, battery-powered devices that heat a liquid to produce an inhalable aerosol, known as vapor. HPs are devices that use heat to generate a nicotine-containing aerosol, which the user inhales. This category includes Tobacco Heated Products and Herbal Products for Heating (HPH). Modern Oral products are smoke-free oral nicotine products called nicotine pouches, designed for use in the mouth. Traditional oral products include snus and snuff. Its brands include Vuse, glo, Velo, Grizzly, Dunhill, Kent, Lucky Strike, Pall Mall, Rothmans, Newport, Natural American Spirit, Camel, and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Gradual Age Increase: The legislation stipulates that the legal age for tobacco sales will rise by one year each year starting in 2027, meaning that those currently 17 or younger will never be able to legally purchase cigarettes, significantly reducing tobacco consumption in the long term.
- New Regulatory Powers: The government will gain new powers to regulate the flavors, packaging, and advertising of vaping and other nicotine products, aimed at preventing these products from appealing to children, which is expected to have a major impact on marketing strategies.
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See More
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- Sales Growth: Turning Point Brands reported net sales of $124.3 million for the quarter, reflecting a nearly 17% year-over-year increase that surpassed analyst expectations of $123.8 million, indicating strong performance in the tobacco market and solidifying its market position.
- Profitability Challenges: Despite the sales increase, non-GAAP net income fell by 11% to $14.8 million, or $0.76 per share, highlighting challenges in profitability that could impact investor confidence and market perception.
- Divergent Product Line Performance: The Stoker smokeless tobacco line saw a remarkable 48% sales increase to $87.6 million, driven by heightened demand for modern oral products, while the Zig-Zag rolling papers line experienced a 22% decline to $36.7 million, illustrating the diversity of the product portfolio and shifting market demands.
- Optimistic Future Outlook: Management raised the sales forecast for modern oral products to $210 million to $225 million for 2026, up from the previous estimate of $180 million to $190 million, which is expected to drive adjusted EBITDA to between $70 million and $90 million, reflecting the company's confidence in future growth.
See More
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- Policy Pressure: President Trump is reportedly pressuring FDA Commissioner Marty Makary to expedite the approval of flavored vapes and nicotine products, highlighting the urgency of his 2024 campaign promise to appeal to younger supporters.
- Health Concerns: Despite the pressure, Makary has expressed concerns about approving fruit flavors that may appeal to children, which could lead the FDA to only approve flavors like mint, coffee, tea, and spices that are deemed more adult-oriented, thereby affecting the variety of products in the market.
- Market Impact: Should the FDA approve flavored vapes, major tobacco companies such as British American Tobacco (BTI), Altria (MO), and Philip Morris International (PM) are likely to benefit, particularly Altria through its stake in Juul and the NJOY brand.
- Financial Outlook: Altria projects an adjusted diluted EPS of $5.56 to $5.72 for 2026, indicating that the company expects to achieve a more balanced performance between the first and second halves of the year.
See More
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- Sales Decline Trend: Barclays' latest analysis shows traditional cigarette volumes declined by 4.3% to 5.5% year-over-year, while Altria's decline was only 4.7%, indicating its relatively stable market performance.
- Competitor Performance: In comparison, British American Tobacco's volumes plummeted by 9.3% and Imperial Brands fell by 9%, highlighting Altria's stronger competitive position and ability to navigate market challenges more effectively.
- Alternative Product Growth: Despite the decline in traditional tobacco sales, nicotine pouch volumes surged by 22%, reflecting consumer interest in next-generation tobacco products, suggesting Altria has room for improvement in this area.
- Dividend Appeal: Altria remains an attractive income stock, drawing attention from investors seeking stable returns, even as it faces a shrinking traditional market, particularly appealing to dividend-focused investors.
See More
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- Sales Volume Decline: According to Barclays, traditional cigarette sales volumes declined year-over-year by 4.3% to 5.5%, with a 5.1% drop in 2026 compared to 2025, although this was better than the expected 7.3% decline, indicating market resilience.
- Altria's Steady Performance: Altria Group's traditional cigarette volumes fell by 4.7%, which is significantly better than British American Tobacco's 9.3% drop and Imperial Brands' 9% decline, suggesting Altria is faring better than its competitors.
- New Product Growth: While traditional tobacco sales are declining, nicotine pouch sales surged by 22%, indicating market potential for certain next-generation products, although e-cigarette sales fell sharply by 17% year-over-year.
- Dividend Appeal: With a market cap of $110 billion and a dividend yield of 6.36%, Altria remains an attractive income stock for dividend-seeking investors, even as it distances itself from the shrinking traditional market.
See More
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- Intel Upgrade: Evercore ISI upgraded Intel from 'In Line' to 'Outperform', citing improved execution under the new CEO, who has fixed the balance sheet and put the company back on a competitive track, which is expected to drive stock price appreciation.
- Maxlinear Upgrade: Needham upgraded Maxlinear from 'Hold' to 'Buy' after the company reported a Q1 beat and guided Q2 well above Street expectations, indicating strong demand driven by data center growth, which could enhance future revenue.
- Shake Shack Initiation: Guggenheim initiated coverage on Shake Shack with a 'Buy' rating and a $120 price target, anticipating profit growth for the burger chain, reflecting positive market sentiment regarding its future performance.
- Oracle Initiation: Wedbush initiated coverage on Oracle with an 'Outperform' rating and a $225 price target, arguing that the market is fundamentally misinterpreting the company's aggressive investment cycle as speculative risk, which could lead to stock price increases.
See More
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- Bill Passage: The UK House of Commons and House of Lords have unanimously passed the Tobacco and Vaping Bill, aimed at creating a 'smokefree generation' by permanently banning tobacco sales to anyone born on or after January 1, 2009, which will have profound implications for future smoking rates.
- Gradual Age Increase: The legislation stipulates that the legal age for tobacco sales will rise by one year each year starting in 2027, meaning that those currently 17 or younger will never be able to legally purchase cigarettes, significantly reducing tobacco consumption in the long term.
- New Regulatory Powers: The government will gain new powers to regulate the flavors, packaging, and advertising of vaping and other nicotine products, aimed at preventing these products from appealing to children, which is expected to have a major impact on marketing strategies.
- Impact on Tobacco Companies: The bill will significantly affect companies like British American Tobacco (BTI) and Imperial Brands (IMBBY), as their UK cigarette sales are expected to face structural erosion, putting long-term performance under pressure.
See More
