A Quick Look At British American Tobacco’s EPS Forecasts

Published in Company Comment on 27 November 2012

How might earnings at British American Tobacco (LSE: BATS) change in the years to come?

It's always worth keeping an eye on the earnings forecasts for your favourite companies, especially if you use forward P/E ratios to gauge when to buy and sell your shares.

You never know, if City brokers have been revising their projections of late, your investments may not be as cheap -- or expensive -- as you think!

Today I'm looking at the earnings per share (EPS) forecasts for British American Tobacco (LSE: BATS) (NYSE: BTI.US), the FTSE 100 (UKX) cigarette maker. All my figures are courtesy of S&P Capital IQ.

The consensus for 2012 is for earnings per share of 207p, which puts the 3,252p shares on a forward P/E of 15.7.

The estimates suggest earnings may rise to 226p per share for 2013 and climb to 247p for the year after that. Earnings per share may then rise further to 274p, and then to 304p in 2016, at least according to City analysts.

The data from S&P Capital IQ also indicates British American Tobacco's revenues may climb from £15.4b during 2012 to £16b during 2013. They may then continue to rise for the next three years after that.

Both the outlook for revenues and earnings for British American Tobacco look relatively healthy for the next few years. But then again, that P/E of around of 16 might imply that the market is already expecting the shares to deliver accordingly.

Whether these projections make British American Tobacco a buy, a hold or a sell is of course up to you, especially given that the share is more expensive than the FTSE, which at 5,786 trades on a P/E of 11.4.

If you already have British American Tobacco in your portfolio, there are plenty of other great stocks out there to consider, too. Some of them are listed in our special in-depth Motley Fool report "Eight Top Dividend Plays Held By Britain's Super Investor".

The report is completely free and shows where buy-and-hold maestro Neil Woodford believes the best FTSE shares are to be found today. You can download the report by clicking here.

> David owns shares in British American Tobacco.

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