From Morningstar: 2024-11-20 05:52:00

Imperial Brands (IMB) announced its full-year results on Nov. 19, 2024, increasing its annual dividend to 153.42p per share, a 4.5% rise. The Fair Value Estimate is £27, with a Morningstar Rating of three stars, a wide Economic Moat, and medium Morningstar Uncertainty Rating.

The company’s fiscal 2024 earnings met expectations, with fiscal 2025 forecasting single-digit net revenue growth and mid-single-digit adjusted operating growth. Imperial Brands has succeeded in maximizing free cash flow and returning capital to shareholders, with tobacco business profits solid and next-generation product losses narrowing.

Imperial Brands plans a £1.25 billion buyback in fiscal 2025, pushing total shareholder return to about £10 billion, representing two-thirds of its market cap five years ago. Tobacco volume declines are decreasing, and next-generation products are moving closer to breakeven, benefiting margins.

Morningstar raised the fair value estimate for Imperial Brands to £27, attributing the increase to improved top-line growth and wider profit margins. The company’s market share gains and price increases have contributed to higher sales growth and adjusted operating margins forecasted at 0.4% and 44.6% for the next five years.

Imperial Brands shares appear fairly valued, but investors seeking tobacco exposure may find attractive upside in wide-moat British American Tobacco. The market may be underestimating the potential of its next-generation product portfolio compared to Philip Morris. The authors do not own shares in any securities mentioned in the article.



Read more at Morningstar: Imperial Brands Raises Dividends on Earnings Growth