Imperial Brands PLC (LSE:IMB) shares fell around 7% in the two days after its half-year update, though analysts said the reaction looked excessive given unchanged full-year guidance.
Deutsche Bank analyst Damien McNeela noted that the reaction was due to market share contracting in the FTSE 100 group's top-five markets, along with increased competition in US pouches and a forex drag on adjusted earnings per share.
First-half adjusted operating profit growth is "likely to be slightly behind expectations", with a higher second half weighting expected.
But he felt the update was broadly in line, arguing the sell-off “looks to be an overreaction”, pointing to modest share losses and FX headwinds, though he trimmed EPS forecasts by less than 1% across the forecast period.
McNeela also noted the stock now trades on around 8.0x earnings with a dividend yield of about 12%, making the shares a 'buy' for him, with a target price of 3,500p compared to the last close at 2,933p.
Jefferies felt some more "gentle pressure" on the shares would have been a fair reflection due to share losses in key markets, slower growth in next-generation products, and currency headwinds.
Panmure Liberum was more blunt, suggesting the market reaction reflected “an overwrought market” rather than any deterioration in fundamentals.
Analyst Rae Maile noted no change to guidance aside from FX, with the company still targeting 3-5% operating profit growth and high single-digit earnings growth at constant currency.
He also highlighted ongoing buybacks, with around 19% of shares retired over the past three and a half years.
Jefferies and Panmure also maintained 'buy' ratings with target prices of 3,700p and 4,200p, respectively.