FTSE 250 shares round-up: can these two stocks continue solid run?

Improving FTSE 250 stocks Ibstock (LSE:IBST) and 4imprint Group (LSE:FOUR) moved in different directions today as  investors focused on UK house building targets and a potential US recession.

Ibstock shares rose 6.6p to 178.8p, extending gains for this year to 19% as the bricks and building materials supplier boosted hopes that today’s results are the trough for volumes.

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The shares of US-focused corporate merchandise firm 4imprint are also a fifth higher this year, although they have fallen 12% in the past week due to economic uncertainty.

It supplies branded products ranging from basic giveaways such as pens and mugs to embroidered apparel and trade show displays. All but $12.8 million of its $667.5 million of half-year revenues were achieved in North America.

Today’s interim results showed demand was short of the company’s original expectations but that it continued to take market share and grow its operating margin.

Pre-tax profits rose by 11% to $73 million, with the company’s strong financial position resulting in a 23% increase in the sterling equivalent dividend to 62.7p a share. This is due to be paid on 16 September.

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Brokers Peel Hunt and Panmure Liberum said after today’s results they continue to see scope for another special dividend payment in 2025.

Peel Hunt, whose price target of 7,500p compares with this afternoon’s level of 5,460p, said: “Margins are progressing nicely and cash is building, which supports additional shareholder return in the new year.”

Panmure Liberum has a price estimate of 6,700p, having nudged up its earnings forecasts for this year and next. It said: “The risk of a US recession may have increased in recent days but it has arguably reduced over time and we believe a short, mild recession could be absorbed given the underlying momentum.”

At Ibstock, the company said the new government’s target to increase housing supply to 300,000 a year had created a more positive backdrop for industry supply chains and demand over the medium term.

It is also encouraged by recent signs of an improving trend in sector lead indicators, although this upturn may come too late to boost market demand in the latter part of the year.

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As a result, adjusted earnings for the second half of the 2024 year are set to be broadly in line with the same period in 2023. This points to flat volumes in the second half.

First-half earnings fell 40% to £38 million, reflecting a £45 million drop in revenues to £178 million as exceptionally wet weather contributed to a 10% decline in volumes.

The impact of carrying additional fixed costs to preserve future production capacity also weighed on earnings. Peel Hunt cut its 2024 forecast by 7% to £80 million following today’s results but believes the company is well placed to exploit a market recovery.

It said: “Capacity is broadly double the current output, and with capital investment coming to an end, we see scope to improve free cash flow significantly as volumes return.”

The interim dividend due for payment on 13 September has been cut to 1.5p from 3.4p the year before, in line with a policy that targets full year cover of approximately two times underlying earnings through the cycle.