Goldman downgrades Imperial Brands as outlook gets more cloudy

It said the shares have disappointed, falling 30% since being added to the buy list in April 2016. Over the same period, meanwhile, the FTSE World Europe returned 23%.

Management’s efforts over the past five years to consolidate, simplify and invest in the company’s brand portfolio have stemmed market share losses, but were not enough to compensate for the deteriorating trends across its key cigarette markets, it said.

"Despite a successful stabilisation of market share across key geographies, organic revenue growth for IMB failed to recover as we had expected, reflecting worsening trends across cigarette markets. Uncertainty over the disruptive effects from next-generation products and regulation have also weighed on the stock, as has a loss of investor confidence on potential consolidation activity involving IMB."

Goldman said it struggles to see a key catalyst for the stock in the absence of a recovery across combustible markets or positive surprises on new products. Also, following recent Nielsen data across the bank's tracked markets, it sees a risk of a miss to management’s FY18 organic revenue growth and earnings per share growth guidance.

At 1120 GMT, the shares were down 1.4% to 2,485.50p.