Brokers: Nomura sees light for cigarette makers

Imperial Tobacco had its target price hiked by Nomura

Results from the world’s largest catering firm Compass Group (LON:CPG) failed to impress enough US heavyweight Goldman Sachs to drop its ‘sell rating’.

The firm was strong revenue growth of around 5.8% in its full-year results, but the broker is worried by an uptick in capex and weaker cash flow generation.

Goldman has reiterated its ‘sell’ rating on the stock, but has upped its target price to 975p from 950p following the results.

Elsewhere, Nomura reckons there could be a spark in the cigarette industry, as it upgraded the UK’s two biggest cigarette makers.

British American Tobacco (LON:BATS) had its ‘buy rating’ reiterate as its target price was bumped up to 4,410p from 3,980p.

The broker said margins look set to improve, despite strong foreign exchange headwinds, with its e-vapour roll-out to pick up pace in the second half.

Rival Imperial Tobacco Group (LON:IMT) also saw its target price upped, to 2,880p from 2,720p, though it has a ‘reduce’ rating on its shares.

Meanwhile, after receiving a boost from Goldman Sachs yesterday, Britvic has been clipped back by HSBC.

The broker’s bullish sentiment on the soft-drinks maker has waned, as it dropped its rating to ‘hold’ from ‘buy’.

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