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These FTSE 100 shares look dirt-cheap on paper. However to my thoughts, the potential dangers they pose to traders far outweigh the attainable rewards.
Right here’s why.
Defying gravity
After experiencing some spring turbulence, the Worldwide Consolidated Airways (LSE:IAG) has risen sharply once more over the summer season. At 390.8p per share, the FTSE firm has now gained 29% in worth because the begin of 2025.
I’m left scratching my head at this rebound given a string of disappointing latest updates from the airline trade. Jet2 was the newest main flyer to sound the alarm on Thursday (4 September) when it slashed income forecasts, warned of a “much less sure shopper atmosphere“, and minimize the variety of seats on sale for the winter season.
This displays robust situations in Europe, and is a foul omen for Worldwide Consolidated Airways, whose continental publicity is critical. That being stated, the British Airways proprietor additionally has substantial world attain to assist it navigate these native points.
The issue is that the outlook for its money-spinning transatlantic routes can be coming underneath stress. Tourism to the US is declining, and significantly from Europe, as travellers reply to the altering political panorama and modifications to immigration guidelines. Recent financial knowledge Stateside suggests rising stress there, too, with indicators of a slowdown casting doubts on future ticket gross sales.
Metropolis analysts count on the airline group’s earnings to soar 21% in 2025. This, in flip, leaves it buying and selling on a price-to-earnings (P/E) ratio of 6.7 occasions.
That’s a fairly enticing valuation on paper. Nonetheless, it’s a ratio I really feel displays the excessive degree of danger the shares carry at this time.
Mixed with conventional earnings threats like risky gas prices, intense competitors, and flight disruptions as a result of strikes by airport and air visitors management personnel, I’m afraid the shares carry far an excessive amount of hazard for my liking. Not even the opportunity of long-term journey progress (and particularly in fast-growing rising markets) is sufficient to make me half with my money.
One other FTSE 100 flyer
Imperial Manufacturers (LSE:IMB) is one other large-cap UK share tipped for strong progress over the close to time period. Metropolis analysts count on a 4% earnings rise this monetary yr (to September 2025) to speed up to 10% in the course of the upcoming monetary yr.
Such forecasts additionally imply the cigarette maker affords respectable worth at face worth. Its P/E ratio for monetary 2026 is an undemanding 9.1 occasions.
However like IAG shares, I imagine this valuation displays Imperial Manufacturers’ unsure income outlook. Extra particularly, it faces an unrelenting gross sales slowdown as shoppers — inspired by stricter guidelines on the sale, promoting, and advertising and marketing of cigarettes, vapourisers, and different nicotone supply automobiles — more and more flip away from them on well being grounds.
Imperial Manufacturers sells its merchandise throughout the globe, together with to markets in Asia and Africa, the place smoking stays prevalent. It additionally enjoys terrific model energy by cartons like JPS and West, which might help it to outperform the broader market.
Nonetheless, the enterprise additionally faces vital declines in its core markets of the US, Europe, and Australia. Weaknesses right here pulled group volumes 3.2% decrease between October and March, newest financials confirmed.
Imperial Manufacturers shares have risen 20% in 2025, to £31.16. However I concern it may very well be only a matter of time earlier than the tobacco titan resumes its long-term downtrend.
