Imperial Brands results show company 'doing what it's supposed to'

Imperial Brands reported adjusted operating profit of £3.99bn and EPS of 315p, both slightly ahead of consensus, and confirmed a £1.45bn share buyback as shares rose about 2% to 3,232p; analysts described the results as execution of the company’s strategy. Management provided FY26 guidance for tobacco net revenue growth in the low single digits, next‑generation products at double digits, operating profit growth of 3–5% and adjusted EPS growth of at least high‑single digits on a constant‑currency basis, with a 2–2.5% currency tailwind—suggesting modest upside to consensus EPS growth of ~9.6%. Brokers say the print reinforces resilient combustible volumes, pricing power and elevated shareholder returns, with RBC neutral (target 2,400p) and Jefferies reiterating buy (target 3,600p).

Analysis

Imperial Brands reported adjusted operating profit of £3.99bn and adjusted EPS of 315p, both modestly ahead of consensus, and announced a £1.45bn share buyback; the stock rose about 2% to 3,232p on the print. RBC highlighted the profit beat and EPS 0.5% above forecasts, describing the result as "doing what it should do," indicating execution rather than a material surprise.

Management guided for FY26 tobacco net revenue growth in the low-single-digits, next‑generation products at double-digit growth, operating profit growth of 3–5% and adjusted EPS growth of at least high-single-digits on a constant currency basis, while expecting a 2–2.5% currency tailwind. RBC interprets these inputs as implying modest upside versus consensus group revenue and EPS forecasts (consensus EPS growth ~9.6%), signaling achievable but limited beat potential into FY26 absent execution variance.

Jefferies reiterated a buy and 3,600p target while RBC remains neutral at 2,400p, reflecting a material valuation spread despite analysts agreeing on resilient combustible volumes, pricing power and elevated shareholder returns. Primary risks to the outlook are underperformance in combustible volumes or pricing, slower-than-expected next‑generation product uptake, or reversal of the modest currency tailwind; monitoring buyback execution and quarterly cadence versus guidance will be key.

Key Decisions for Investors

• Investors should maintain or modestly accumulate positions on weakness given the £1.45bn buyback, confirmed FY26 guidance and resilient combustibles fundamentals, but size new exposure recognizing upside appears modest relative to consensus
• Monitor quarterly tobacco net revenue and next‑generation product growth against management guidance and the realization of the 2–2.5% currency tailwind, as these will determine whether EPS outperformance materializes
• Consider trimming or implementing downside protection if the stock rallies toward Jefferies' 3,600p target without clear acceleration in next‑gen volumes, noting RBC's neutral stance and lower 2,400p valuation view