Goldman Sachs Upgrades Reckitt to Buy With 6,500p Target as Shares Rise 1.9%

Goldman Sachs has upgraded Reckitt Benckiser (LON: RKT) to Buy from Neutral and raised its price target to 6,500p from 5,600p, according to a research note reported today. The shares of the FTSE 100 group rose about 1.9%.

Reckitt was up about 1.9% at 5,072p at 09:33 London time, a delayed quote, from 4,977p at yesterday’s close, after opening today at 5,040p. That still leaves the stock 22.1% below its closing high of 6,512p on the 27th of February.

The note says “Current share levels offer an attractive entry point into Reckitt’s solid sales and margin growth”.

The new target implies upside of about 28% from 5,072p. This is an analyst call rather than company news, and the shares have been range-bound since July, though well above the 4,443p closing low of the 2nd of June.

The company’s most recent results, for the first half, were published on the 29th of July. Core Reckitt like-for-like sales grew 2.7% over the half and 4.2% in the second quarter, while Mead Johnson grew 2.0% and 7.2% respectively.

Adjusted operating margin was 23.6%, down 100 basis points but ahead of expectations. Reckitt announced a £500m buyback and an 88.6p interim dividend. Chief executive Kris Licht said: “We accelerated like-for-like net revenue growth in the second quarter to drive a good first half performance.”

Full-year guidance is for core like-for-like growth of 4% to 5% and an adjusted operating margin of 24.9% to 25.6%, above the first-half margin.

Goldman is not the first big bank to turn positive. JPMorgan upgraded Reckitt to overweight on the 1st of September.

The next tests are the third-quarter trading update and the US winter season, when Mucinex, including Mucinex 12HR Cold & Fever, and Lysol drive the fourth quarter. Separately, a federal jury cleared Mead Johnson in the first federal NEC trial on the 31st of August.