RBC upgrades Imperial Brands despite lack of dividend reset

Such measures, the Canadian broker said, were some of the few levers left for management to pull.

Thus, Imperial's guidance for low single digit sales and earnings per share growth in 2020 was now "realistic", unlike in previous years.

And the decision to exclude profits from disposals, pension credits and asset revaluations from its adjusted earnings before interest and taxes was a "good" thing, as was the promise to consider how to most appropriately treat restructuring past 2020.

Restructuring expenses should be included in the company's prefered measure of operating profits, adjusted EBIT, they said.

As well, the company had yet to reset its dividend payout, as RBC had been anticipating, which would mean prioritising deleveraging.

The anlaysts also remained "very wary" regarding the medium to long-term prospects for tobacco industry, especially due to the uncertain regulatory environment, globally, for vaping.

The outlook for Imperial Brands was particularly fraught on that front, given the "underwhelming" performance of its own Next Generation Products, which includes vaping.

Nonetheless, all of those negatives were now reflected in its share price - too much so.

"We think that the share price sensibly captures our expectation of subdued revenue growth and declining margins for the foreseeable future," RBC said.

"Indeed, having updated our currency assumptions and trimmed our capital expenditure assumptions we increase our Adjusted Present Value derived target price to £18.0 from £16.0."