Reckitt Benckiser Stock Holds Firm Above 5,500p on Upgraded Growth Target

Reckitt Benckiser (RKT.L) shares are maintaining a strong position above 5,500p, buoyed by an upgraded full-year revenue growth target for its core brands.

The consumer goods giant's positive outlook has resonated with markets, offsetting concerns about legal challenges and board changes.

The stock experienced a notable jump, rising 10% on July 24, after the company revised its like-for-like (LFL) net revenue growth target for Core Reckitt upwards.

The company now anticipates growth exceeding 4% for FY25, a step up from the previous guidance of 3% to 4%. This core segment includes prominent brands like Nurofen and Dettol, which are key drivers of the company's performance.

This upward revision came in tandem with the announcement of a 1.9% increase in second-quarter LFL sales, reflecting a 2.1% improvement in price/mix, although this was partially offset by a 0.2% decline in volume. For the first half of the year, sales grew 1.5% on a LFL basis, while operating profit saw a 1.8% increase, reaching £1.7 billion.

First-half sales grew 1.5% on a LFL basis, while operating profit was 1.8% higher at £1.7bn. The company is benefiting from its “Fuel for Growth” programme, which is reportedly ahead of schedule, reducing fixed costs and fueling brand investments.

Analyst reactions to Reckitt Benckiser's performance have been mixed, reflecting differing perspectives on the company's future trajectory. Royal Bank of Canada (RBC) increased its price target from 5,700p to 6,000p, maintaining an “outperform” rating, indicating confidence in the company's prospects.

In contrast, Berenberg Bank lowered its price target from 5,920p to 5,555p, assigning a “hold” rating, suggesting a more cautious outlook. Deutsche Bank also increased its price target to 5,600p, reiterating a “hold” rating.

Adding to the positive sentiment, Reckitt Benckiser initiated a £1 billion share buyback program in late July. Such programs are often viewed favorably by markets, as they can lead to an increase in earnings per share and signal management's confidence in the company's valuation.

Looking ahead, Reckitt Benckiser's ability to sustain its growth momentum will depend on several factors, including its ability to navigate the challenging consumer environment in developed markets and capitalize on opportunities in emerging markets. The company's “Fuel for Growth” program will also be crucial in driving efficiency and margin expansion.