Broker tips: Imperial Brands, Paragon Group, BP

(ShareCast News) - Barclays upgraded Imperial Brands to 'overweight' from 'equalweight' and lifted the price target to 4,200p from 3,750p, driven by more bullish medium-term expectations.The bank said organic sales momentum is improving and margin/cash generation increases underpin dividend growth of 10%+."Moreover, we are increasingly confident margins will surprise to the upside and that the US is performing ahead of expectations."Given increasing competitive threats from new entrants elsewhere in Staples, the ongoing high barriers in Tobacco should continue to protect the profit pool."In addition, Barclays argued that regulatory fears over issues such as the revised EU Tobacco Products Directive (TPD) and plain packaging in the UK and France are overdone."With the UK accounting for c. 10% and c. 15% of group sales and EBIT (Barclays estimates), respectively, and in light of the significant down-trading witnessed in Australia after the implementation of plain packaging in 2012, investors' concerns on the potential damage to Imperial's UK business are understandable," the bank said.However, Barclays said Imperial was well prepared to weather any storm.It said the impact of plain packaging in the UK/France and EU TPD will be benign."Implementation costs are already in estimates, while Imperial's Australian experience and the narrower price gap between mainstream/economy brands should limit the impact of down trading." Paragon's shares fell on Tuesday after Numis said it expects to downgrade its estimates "modestly" following the mortgage lender's first half results.Numis said the company's results were "a little below our top of the range forecasts" but reiterated a 'buy' rating and target price of 357p, saying Paragon remains cheap being valued at 7.4x earnings.Paragon reported a 12.5% increase in underlying profits to £71.9m in the first half, driven by a 84.6% increase in buy-to-let lending to £823.6m.The surge in buy-to-let lending came ahead of the introduction of higher stamp duty on such purchases from 1 April."We see the prospect of increased pressure on buy-to-let landlords which is reflected in our estimate that Paragon Mortgages will see its profit decline 3% in 2017, 9% in 2018 and 12% in 2019," Numis said.Numis added that credit remains relatively tight with banks still undertaking real affordability tests. Household debt also remains down on the previous cyclical peak, although it has started to increase rapidly and bank sector leverage is much lower than pre-financial crisis levels, the broker added."A slowdown is possible but the Paragon share price is pricing in a lot worse." A lower outlook for crude oil prices in 2016, following the weak start to the year, led analysts at JP Morgan to lower their forecasts for European integrated oil companies´ earnings per share in 2016 and 2017.However, greater investor confidence in the outlook for oil prices meant the share price of those companies in their coverage universe - BP,Total, Galp - should trade closer to their analysts´ estimates for their valuation using a 'sum-of-the-parts' methodology.Indeed, on average they raised their target prices for those stocks.Brent crude oil was now expected to trade at an average of $45 and $55 per barrel in 2016 and 2017, with the broker´s forecasts for each year having come down by $5.In particular, analyst Nitin Sharma said he preferred those companies that had lower oil price breakevens, such as BP and Total.Both oil majors were likely to "deliver organic cash cover for the dividend at or below $55/bbl", he said.Sharma also added BP to the broker´s Analyst Focus List, explaining in a research note sent to clients that its dividend was "relatively high" and "safe".The analyst bumped up his target price from 400p to 410p and reiterated his 'overweight' view on the shares."We believe that question marks on BP's dividend sustainability are likely to decline through 2016 - BP's guidance of $50-55/bbl organic cash break-even (post dividend) is credible, in our view. We also believe that big-ticket M&A risk attached to BP is unwarranted given its healthy project pipeline, good long-term exploration track record, and limited balance sheet room."