On Thursday, Jefferies updated its outlook on Reckitt Benckiser Group PLC (LSE:LON:RKT) (OTC:RBGLY), raising the price target to £41.00 from the previous £40.00. The firm has retained its Underperform rating on the stock.
The adjustment comes as Jefferies anticipates the company's first-quarter results for 2024, which are set to be released on April 24. The firm's analysts expect Reckitt Benckiser's organic sales growth (OSGe) to decline by 2.8% in the first quarter, which is more pessimistic than the consensus estimate of a 1.2% decline.
The analysts have based their projection on the belief that the Nutrition division will no longer benefit from a competitor's recall, and the Health division will face challenges due to the lapping of a strong cold and flu season. Despite the downward revision in OSGe, Jefferies has slightly increased the price target, citing a £4 billion base case litigation risk, which is lower than the previous £5.4 billion estimate.
According to Jefferies, this higher end of a wide range is likely to be factored into the stock's valuation as investors seek visibility for the second half of 2024.
Reckitt Benckiser, a leading consumer health and hygiene company, is expected to face a more significant contribution to its full-year growth during the second half of the year, as indicated by market consensus. The firm's analysts suggest that the current market expectations for the latter part of the year may be overly optimistic, influencing their cautious stance.
The firm's analysis and price target revision offers a nuanced view of the company's short-term prospects ahead of this key financial update.
InvestingPro Insights
As Reckitt Benckiser Group PLC (OTC:RBGLY) approaches its first-quarter earnings report, real-time data from InvestingPro provides a deeper financial perspective. The company's market capitalization stands at a robust $40.32 billion, with a price-to-earnings (P/E) ratio of 19.63, which adjusts to a more favorable 14.19 based on the last twelve months as of Q4 2023. This adjustment reflects a valuation that may be more in line with the company's earnings. Additionally, the gross profit margin during the same period was an impressive 59.97%, showcasing the company's ability to maintain profitability.
InvestingPro Tips highlight that despite recent price declines—with a 3-month total return of -19.38%—Reckitt Benckiser has a strong track record of dividend payments, having maintained them for 33 consecutive years, and offers a high dividend yield of 6.4%. These factors could appeal to income-focused investors. Moreover, although short-term obligations exceed liquid assets, analysts predict the company will be profitable this year, which may provide some reassurance regarding its financial health.
For those considering an in-depth analysis, InvestingPro offers additional insights, including 7 more InvestingPro Tips for Reckitt Benckiser, which can be accessed at https://www.investing.com/pro/RBGLY. To enhance your research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering you a comprehensive investment toolkit.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.