Reckitt's Future Looks Ugly, say Analysts

The near term may remain ugly for Reckitt Benckiser due to the return of commodity inflation, the recovering British pound, and pricing pressures 

Philip Gorham 20 February, 2018 | 8:21AM

Reckitt Benckiser brand Dettol consumer staples pricing power equity stocks UK market

Reckitt Benckiser (RB.) closed the books on a year to forget in 2017 with a fourth quarter that showed that although it is far from firing on all cylinders, the core business appears to be stabilising, say Morningstar equity analysts.

These results show that RB is not immune from the ongoing structural changes in consumer staples retail, but with a portfolio that is increasingly skewed to businesses with pricing power, a key reason for our wide moat rating, we think RB has a better chance than most in its peer group of reigniting organic growth. The near term may remain ugly due to the return of commodity inflation, the recovering British pound, and pricing pressures in the weaker parts of the portfolio, and although we may temper our near-term assumptions as a result, this should have minimal impact on our £74 fair value estimate. After a significant retracement over the past nine months, we think the stock is now trading close to an attractive margin of safety, and we recommend investors kick the tires.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Reckitt Benckiser Group PLC7,446.00 GBX-1.09

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Philip Gorham  

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