Imperial Brands PLC (LSE:IMB)'s results showed again it is very good at selling cigarettes but maybe not next-generation products, says Jefferies.
The full-year numbers were “decent”, especially organic earnings growth of 3.9% and the 5% target for this year, the bank added.
In a market that is focused on cash returns, Imperial also looks compelling, says Jefferies: “Its current buyback and divi yield is in excess of 15%."
Jefferies acknowledges that Imperial's combustible profit delivery is among peer best, as pricing and efficiencies more than offset volume pressures.
But that is where the good news stops, suggests the US bank.
“Increasingly significant pressure on combustible [cigarettes] volumes can't be offset by pricing/efficiencies forever,” it argues.
Growing risks are the ever-rising tide of health and regulatory pressure and while headline cigarette share was up across core markets this was largely driven by the US alone, where trends have recently slowed.
Jefferies has a 'hold' recommendation and target price of 1,636p, down from 1,670p previously.
Shares today were up 2.25% at 1,842p.