Imperial Brands share price: Jefferies sees group as ‘undervalued’

Comments follow tobacco maker’s full-year results

Imperial Brands share price: Jefferies sees group as ‘undervalued’

Analysts at Jefferies remain bullish on Imperial Brands (LON:IMB), arguing that the group’s shares are undervalued. The comments come after the tobacco manufacturer updated investors on its full-year performance yesterday, announcing that it would step up its spending plans.

Investors reacted negatively to the news, sending Imperial Brands’ share price tumbling three percent to 3,689.00p in yesterday’s session, underperforming the broader London market, with the FTSE 100 index adding 36.23 points to close 0.53 percent higher at 6,843.13. The group’s shares have gained more than four percent over the past year, as compared with a more than seven-percent advance in the Footsie.

Jefferies reaffirmed Imperial Brands as a ‘buy’ yesterday, with a price target of 4,800p on the stock.

“While not set to grow earnings at the same level as peers, it needs to be judged on different parameters, in our view, with too much focus on share trends not doing the name justice,” the broker’s analyst Owen Bennett said, as quoted by Citywire. The comments came after the tobacco manufacturer unveiled new investment, a response to rival British American Tobacco’s proposed $47 billion buy-out of Reynolds American, which would create the world’s biggest international tobacco company.

“We believe that actions the company has taken has positioned it well to deliver mid-single digit earnings over the medium to long-term,” Bennet pointed out, adding that he expects full-year 2017 earnings per share growth of over 10 percent which, he argues, “is not appropriately reflected in the valuation”.

The 16 analysts offering 12-month price targets for Imperial Brands for the Financial Times have a median target of 4,465.00p, with a high estimate of 4,800.00p and a low estimate of 3,550.00p. As of November 4, the consensus forecast amongst 19 polled investment analysts covering the blue-chip tobacco manufacturer has it that the company will outperform the market.

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