Imperial Tobacco edges higher

The Bristol-based manufacturer will announce its full-year figures on 3 November, and the share price keeps climbing.

Cigarettes
Source: Bloomberg

Profits at Imperial Tobacco keep rising and so does the share price, despite tougher regulation on the sector and the conflict in Iraq denting sales.

In the first-half the company posted a small jump in earnings, and is expanding its operation in the US as a way of becoming less dependent on the UK. The British government has voted to ban cigarette pack branding and this will come into effect in May 2016. 

Imperial Tobacco has acquired Lorillard in the US and the aim is to make the revenue stream from the country account for 25% of group sales. The diversification of earnings will benefit the company as there is higher potential for profitability in counties where the regulation is not as tight.

Cost-cutting has included closing down factories in the tobacco business, and as health concerns are rising, the company has launched non-tobacco products. Imperial Tobacco will seek to tap into the growing e-cigarette market, and with the way regulation is going it will become a bigger segment of its business.

When Imperial Tobacco reports its annual results, traders will be expecting revenue of $7.22 billion and adjusted net income of $1.98 billion, and these forecasts represent a 2.7% drop in revenue and a 2% jump in adjusted net income.

The firm will also announce its second-half numbers on the same date, and dealers are anticipating revenue of $3.9 billion and adjusted net income of $1.1 billion. That compares with the first-half revenue and adjusted net income of $2.94 billion and $889 billion respectively.

Investment banks are very bullish on Imperial Tobacco, and out of the 26 ratings, 14 are buys, eight are holds, and four are sells. The average target price is £34.97, which is marginally lower than the current price. Equity analysts are also very bullish on British American Tobacco, and out of the 30 recommendations, 14 are buys, 13 are holds, and three are sells.

The share price is in a steady uptrend and the record-high of £35.38 is the target – a move above it will bring the psychological £40 level into sight. Pullbacks will allow traders to buy on the dip, and support will be found in the £35 area and then at £31.80.

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