On Tuesday, CFRA, a financial research firm, increased the price target for Imperial Brands (IMB:LN) (OTC: OTC:IMBBY) to GBP27.00, up from GBP24.00, while maintaining a Hold rating on the stock. The adjustment reflects a forward price-to-earnings (P/E) ratio of 8.6 times for the fiscal year ending September 2025, which is below the industry average of 12.4 times. This valuation accounts for Imperial Brands' comparatively weaker growth prospects.
Imperial Brands reported a net revenue increase of 4.6% on a constant currency basis for the fiscal year 2024, surpassing the consensus estimate of 2.9%. This growth was attributed to strong tobacco pricing and robust expansion in the company's Next (LON:NXT) Generation Products (NGP) segment. Despite the impressive 26.4% revenue growth in NGP for FY24, and a cumulative increase of 64% over the past four years, this segment still accounts for less than 5% of the group's total net revenue.
The company's earnings per share (EPS) estimate for FY25 remains at GBP3.14, with an initial EPS forecast for FY26 set at GBP3.40. Imperial Brands' performance has been solid, with the company promising higher shareholder returns in the near term. This commitment appears feasible given the company's strong volume development and market share performance.
For the fiscal year 2025, Imperial Brands is targeting an adjusted operating profit growth in the mid-single-digit range. The majority of this growth is expected to occur in the second half of the fiscal year, as the company plans its pricing and investment strategies.
In other recent news, Imperial Brands has been in the spotlight due to a couple of major developments. The company received an upgrade in its stock rating from Morgan Stanley (NYSE:MS), moving from Equalweight to Overweight. This upgrade reflects Morgan Stanley's positive outlook on the company's financial strategies and market position, particularly in comparison to British American Tobacco (NYSE:BTI).
The analyst at Morgan Stanley anticipates that Imperial Brands will repurchase approximately 25% of its market capitalization over the next three years, a substantial move driven by its lower leverage and reduced near-term litigation risk.
Furthermore, the company has predicted a 20% to 30% increase in revenue from next-generation products for fiscal 2024 and has committed to returning £2.8 billion to shareholders. These recent developments highlight Imperial Brands' strong financial position and potential for growth.
On a different note, Vistry, a homebuilder, experienced a significant drop in shares by 33% after announcing a reduction in its profit forecast for fiscal 2024. This was due to rising build costs within one of its divisions, leading to a downward pressure on the household goods and home construction sector.
InvestingPro Insights
Imperial Brands' recent performance and CFRA's price target increase are complemented by several key insights from InvestingPro. The company's P/E ratio of 10.68, which is lower than the industry average mentioned in the article, aligns with CFRA's valuation assessment. This is further supported by an InvestingPro Tip indicating that Imperial Brands is "Trading at a low earnings multiple."
The company's commitment to shareholder returns, as noted in the article, is reinforced by InvestingPro data showing a dividend yield of 3.94% and a significant dividend growth of 29.75% over the last twelve months. An InvestingPro Tip highlights that Imperial Brands "Has maintained dividend payments for 28 consecutive years," underscoring its long-term commitment to returning value to shareholders.
Additionally, Imperial Brands' strong performance is reflected in its stock price, with InvestingPro data showing a 42.1% total return over the past year and the stock trading near its 52-week high. This positive momentum aligns with the company's reported revenue growth and promising outlook for its Next Generation Products segment.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Imperial Brands, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.