London, April 24, 2026, 14:55 BST
Morgan Stanley cut Imperial Brands PLC to “equal-weight” on Friday while lifting British American Tobacco to “overweight”, a fresh relative call on the UK tobacco sector as Imperial continues to lean on buybacks and pricing to support returns. MarketScreener’s Cboe Europe estimate showed Imperial down 0.18% at 2,767 pence, while BAT was up 3.23% at 4,342 pence. MarketScreener
The downgrade matters because Imperial’s investment case is being tested before its May 12 half-year results. The company has stuck with full-year targets, but its latest trading update pointed to market-share pressure in its five biggest markets and a second-half bias to profit growth.
Imperial said late Thursday it bought 180,000 ordinary shares for cancellation on April 23 at an average price of 2,770.0744 pence. The purchase, handled through Barclays, will cut the number of ordinary shares in issue to 778,617,165, excluding treasury shares.
That followed a separate purchase of 275,000 shares on April 22 at an average 2,734.8202 pence. Together, the two notices show Imperial still pressing ahead with the £1.45 billion repurchase programme it set out for the financial year.
The buyback is not just cosmetic. Fewer shares can lift earnings per share, a key profit measure calculated by dividing earnings by the number of shares, even if operating growth is modest. Imperial said on April 14 it had completed £0.7 billion of the FY26 buyback by March 31 as part of an “evergreen” buyback programme running to 2030. Investegate
Investors are also watching the register. Spring Mountain Investments Ltd notified Imperial on April 23 that its voting rights had fallen to 3.991658% from 4.797790%, after a threshold was crossed on April 21.
The core issue remains growth. Imperial expects low-single-digit tobacco and next-generation product revenue growth in the first half, with next-generation products, or NGPs — vapes, heated tobacco and nicotine pouches — still taking investment as the group tries to build scale. It also expects NGP adjusted operating losses to be moderately higher.
Analysts have flagged that tension. AJ Bell investment director Russ Mould said Imperial “must work hard to generate the cash flow that funds its dividends and share buybacks,” adding that concerns over market-share loss and currency movements had weighed on the first-half update. AJ Bell
Richard Hunter, head of markets at interactive investor, wrote that changing lifestyle habits and tougher regulation “perennially overhang” the sector, while the lack of a fresh catalyst in the trading update had disappointed investors. Interactive Investor
Competitive pressure is sharpening. Reuters reported this month that Imperial has typically undercut rivals such as British American Tobacco and Philip Morris International on pricing, while those peers have leaned more on premium branding and heavier innovation spending.
There is a risk that the story gets harder in the second half. Imperial said the Middle East conflict had not had a material business impact so far, but warned the potential effect later in the year remained uncertain; it also expects foreign exchange to be a 0% to 1% headwind to full-year earnings per share.
For now, the company is asking investors to accept a familiar trade-off: modest organic growth, high cash generation and steady capital returns. The next test comes on May 12, when Imperial is due to publish first-half results.
