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These FTSE 100 shares look dirt-cheap on paper. However to my thoughts, the potential dangers they pose to buyers far outweigh the doable 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 setting“, and lower the variety of seats on sale for the winter season.
This displays powerful circumstances in Europe, and is a nasty omen for Worldwide Consolidated Airways, whose continental publicity is important. That being stated, the British Airways proprietor additionally has substantial international attain to assist it navigate these native points.
The issue is that the outlook for its money-spinning transatlantic routes can also be coming below strain. Tourism to the US is declining, and notably from Europe, as travellers reply to the altering political panorama and adjustments to immigration guidelines. Contemporary financial information Stateside suggests rising stress there, too, with indicators of a slowdown casting doubts on future ticket gross sales.
Metropolis analysts anticipate 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. Nevertheless, it’s a ratio I really feel displays the excessive stage of threat the shares carry right this moment.
Mixed with conventional earnings threats like unstable gas prices, intense competitors, and flight disruptions because of strikes by airport and air site visitors management personnel, I’m afraid the shares carry far an excessive amount of hazard for my liking. Not even the potential of long-term journey development (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 stable development over the close to time period. Metropolis analysts anticipate a 4% earnings rise this monetary 12 months (to September 2025) to speed up to 10% in the course of the upcoming monetary 12 months.
Such forecasts additionally imply the cigarette maker provides respectable worth at face worth. Its P/E ratio for monetary 2026 is an undemanding 9.1 occasions.
However like IAG shares, I consider this valuation displays Imperial Manufacturers’ unsure income outlook. Extra particularly, it faces an unrelenting gross sales slowdown as customers — inspired by stricter guidelines on the sale, promoting, and advertising 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 via cartons like JPS and West, which will help it to outperform the broader market.
Nevertheless, 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 worry it may very well be only a matter of time earlier than the tobacco titan resumes its long-term downtrend.
