Must read: Imperial Brands, Babcock, Nvidia

IMPERIAL BRANDS – TUES 18 NOVEMBER

Richard Hunter, Head of Markets, interactive investor says, “Changing lifestyle habits and tougher regulation perennially overhang this sector, but in the meantime Imperial Brands (LSE:IMB) has played the cards it has been dealt with aplomb.

Quite apart from the changing landscape and the burden of regulatory censure which has plagued the sector over recent years, there is also a reluctance among some investors to invest in tobacco companies at all on ethical grounds. As such, the tobacco companies are racing towards Next Generation Products (NGP) as an alternative and are doing so from a relatively recent standing start.

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In terms of outlook, the group is focused on completing its current five-year strategic focus, with details of the next leg of the strategy to possibly be announced with these results.

Elsewhere, the tobacco majors continue to benefit from the extraordinary cash generation which their sector enables. Tobacco remains a product which has inelastic demand, providing the ability to raise prices without unduly dampening demand and this pricing mix has seen the benefit as a result, with falling volumes more than offset by higher prices.

As such, the group retains its ability to choose between shareholder returns, investment in the business, paying down debt or indeed all of these. At the present time, shareholder returns are in sharp focus, with a previously announced £1.45 billion share buyback programme as part of a multi-year programme. At the same time, a dividend yield of 5% adds to what has been a significant total return for shareholders.

Apart from the additional dividend bonus, the share price has risen by 37% over the last 12 months and by 25% this year alone. Even after such a climb, the shares are not obviously expensive in terms of historic valuation. Despite the obvious concerns of changing habits and a more immediate drag from some large investors either unwilling or unable to buy tobacco shares, Imperial is maximising its current power and hopes will be high that this trend has continued.”

BABCOCK INTERNATIONAL – FRI 21 NOVEMBER

Richard Hunter says, “It is an unfortunate sign of the times that the defence sector is booming, although that particular tide is lifting all boats. Indeed, given the general economic difficulties which many companies are currently facing, Babcock International Group (LSE:BAB)’s recent comment that the “macro environment remains supportive” is one which is rarely heard from boardrooms at present.

Its most recent trading statement in September revealed that Babcock had remained busy, having received several contracts of note, such as an AU$250 million, eight-year follow-on contract with the Australian Border Force. Such contracts also add some further visibility to earnings.

There was a slight blot on the landscape with lower revenues in its Land division, which accounts for 23% of sales due to lower Rail business but any slack has more than been picked up elsewhere. Strong growth continued to be seen in the Nuclear business (37.5% of sales) and Aviation (7%), while Marine (32.5%) was also enjoying ongoing growth.

This strengthening financial performance also resulted in an increase to shareholder returns, with the announcement of a £200 million share buyback programme for the first time in the company’s history, a clear statement of intent and confidence in future prospects.

Investors will scour the numbers for any changes to the outlook, where the group previously reported full-year revenues of £4.83 billion, which it expects to increase to £5.1 billion this year, with underlying operating profit estimated to rise to £401 million from £363.9 million. In addition, an upgrade to the underlying operating margin led to an expected 8% this year and 9% thereafter.

Expectations for prospects may be on a march, but for the most part the likes of Babcock have more than lived up to their billing. The shares have risen by 134% this year alone and, despite this extraordinary rally, appetite for the group appears to be undiminished.”

NVIDIA – WED 19 NOVEMBER

Victoria Scholar, Head of Investment, interactive investor says, “All eyes are on NVIDIA Corp (NASDAQ:NVDA) next Wednesday as it prepares to release its latest results. Investors in the chipmaker will be hoping that this set of earnings puts to bed any worries that its share price has risen too high and too fast.

According to Nvidia, 2026 third-quarter revenue is expected to reach $54 billion (plus or minus 2%), up from $46.74 billion in the previous quarter. The company is hoping to deliver its tenth straight quarter of revenue growth above 50%. This is a very high bar for the producer of GPU chips, and if group sales growth misses this threshold, investors might get spooked.

In August, Nvidia reported a beat on the top and bottom lines. However, shares fell after its data centre business revenue came below forecasts. A lot of attention will again be on its latest data centre sales figure out next week.

Focus will also be on deliveries of its flagship AI Blackwell Ultra chips as well as guidance for the current quarter as investors look for any signs that the AI boom is running out of steam. Meanwhile, China related write-downs will also be closely watched after President Trump’s export restrictions blocked sales to China earlier this year.

Nvidia has successfully positioned itself at the heart of the AI revolution and investors have reaped the rewards with shares rallying more than 40% over the past six months, despite fears of an AI bubble, although price action in November has become a lot more unsteady.

According to Refinitiv, there is still a consensus buy on the stock with an average price target of $240.95, representing around 20% upside from the current share price.”