On Tuesday, Citi made adjustments to its financial outlook for Imperial Brands (OTC:IMBBY) shares, a prominent tobacco company. The firm's analyst revised the price target, setting it at £20.10, a slight decrease from the previous £20.50. Despite this adjustment, Citi continues to recommend a Buy rating on the stock.
The revision follows Imperial Brands' first-half fiscal year 2024 earnings update, which prompted the analyst to update their model. The new price target reflects a modest reduction in volume expectations for the company, attributed to shipment disruptions in the AAACE region, particularly the Middle East. However, this negative impact was largely balanced out by stronger pricing in the European market.
The analyst's report suggests that the overall Tobacco Operating Segment Growth (OSG) for the fiscal year 2024 is anticipated to remain stable at about 1.6%, aligning with the company's guidance for a low single-digit increase. At the EBIT level, the analyst expects organic profit growth, including contributions from Logista, to be around 1.9% for the first half of the year, which is in line with the low single-digit growth highlighted in the trading statement.
For the full fiscal year 2024, the analyst projects organic EBIT growth to remain at 4.5%. However, adjustments were made in response to Imperial Brands' updated 2024 foreign exchange guidance, which indicates an expected revenue decrease of 2% and a 3.5% reduction in EBIT. Additionally, a slight decrease in finance costs, now estimated to be around £450 million, led to a 2% reduction in the forecast for the company's full-year earnings per share.
In summary, despite the changes in volume expectations and the impact of foreign exchange rates, Citi's outlook for Imperial Brands' performance remains positive, with a continued Buy rating but a slightly adjusted price target to reflect the recent updates.
InvestingPro Insights
As Imperial Brands navigates through its fiscal challenges and opportunities, it's valuable for investors to consider key financial metrics and expert analysis. According to InvestingPro data, Imperial Brands (IMBBY) is trading at a low P/E ratio of 6.89, reflecting an attractive valuation relative to near-term earnings growth. This is further supported by an adjusted P/E ratio for the last twelve months as of Q4 2023, which sits at 6.36. Additionally, the company's revenue growth for the same period was 6.92%, indicating a solid financial performance.
From an investment standpoint, two notable InvestingPro Tips highlight the company's shareholder appeal. First, management's aggressive share buyback program signifies confidence in the company's value and prospects. Second, Imperial Brands has been consistent in rewarding its investors, maintaining dividend payments for 28 consecutive years, with a dividend yield reported at 8.19% as of early 2024.
For those looking to delve deeper into the financial health and forecasts for Imperial Brands, additional InvestingPro Tips are available, providing insights into aspects such as sales predictions, liquidity, and profitability. Readers can access these tips and more by exploring InvestingPro and take advantage of the exclusive offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With over 10 additional tips listed on InvestingPro, investors can gain a comprehensive understanding of the company's potential and make informed decisions.
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