|
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
The Auto Beat
Byte of the Apple
Europe Insight
Eye on Asia
Getting In
Investing Insights
The New Entrepreneur
NEXT: Innovation Tools & Trends
On Media
Technology at Work
The Tech Beat
Traveler's Check
TECHNOLOGY
Product Reviews
Tech Stats
Hands On
AUTOS
Home Page
Auto Reviews
Car Care & Safety
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip FINANCE Investing: Europe Annual Reports Bloomberg BW50 SCOREBOARDS Hot Growth Companies: 2008 Mutual Funds Info Tech 100 B-SCHOOLS Undergrad Programs Rankings & Profiles |  |
JULY 12, 2004
British American: Tobacco Without The Flames  Just as smokers crave cigarettes without cancer risk, investors long for tobacco company cash flows without litigation risk. At British American Tobacco (BTI)
), the fear of litigation, if not the fact, is being eased by the sale of its U.S. business, Brown & Williamson Tobacco, to R.J. Reynolds Tobacco (RJR
). The stock rose 5% after U.S. regulators approved the deal on June 22. David Winters, CEO of the Mutual Series mutual funds, which own 2.5% of the stock, says: "Even from here we'll make another 20% to 30%" in 12 months. Also, the dividend yields nearly 5%. Shares trade at about 10 times 2005 estimates by analysts, says Thomson First Call. Winters says earnings per share will grow about 15%. The reason: Synergies from deals and cost savings at headquarters will lift earnings and fund buybacks to reduce shares outstanding. The company is just starting to reap benefits from buying Ente Tabacchi Italiani in December. It will own 42% of the new RJR. Growth should come from emerging-market countries with growing populations. Morgan Stanley (MWD
) analyst Jonathan Fell sees shares rising only 4% but says the cash flows are attractive at a time of low market returns.
Gene Marcial is away for several weeks. Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.  By David Henry Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2004, Bloomberg L.P.Terms of Use | Privacy Notice |
Printer-Friendly Version
