Reckitt not yet rewarded for improved earnings model, says UBS after strong quarter Proactive uses images sourced from Shutterstock
UBS maintained its ‘buy’ rating on Reckitt Benckiser Group PLC (LSE:RKT, FRA:3RB, XETRA:3RB), the consumer goods company behind brands including Dettol, Nurofen and Durex, on Friday but cut its price target by 5% to £74, arguing the market has yet to reward the group for an improved long-term earnings growth model.
The note followed Thursday’s results, in which Reckitt reported like-for-like (LFL) sales growth of 5.2% in the fourth quarter of 2025, a metric that strips out currency and portfolio changes, which UBS described as best in class among European peers.
UBS identified three factors weighing on investor sentiment.
The first was heavy reliance on emerging markets, which grew at 17% LFL in the quarter and accounted for more than 100% of group growth, raising questions about sustainability against a high base of comparison in 2026.
The second was a weak performance in Europe, where the company cited subdued demand and elevated promotional activity.
The third was the added forecasting complexity arising from the planned deconsolidation of the Essential Home (EH) division, which makes products including Air Wick and Finish.
The broker estimates Reckitt will deliver adjusted earnings per share of 345p in 2026, down around 2% year on year, as profit growth in the retained Core Reckitt and Mead Johnson Nutrition infant formula businesses fails to compensate for the loss of Essential Home earnings and a higher tax rate.
UBS forecasts Core Reckitt LFL growth of 4.6% for full-year 2026, with improvement expected from the second quarter as the seasonal over-the-counter medicines portfolio, which includes Mucinex, Strepsils and Lemsip, laps an unusually weak prior-year period.
Despite the near-term earnings pressure, UBS argued that 2026 should mark a turning point in how investors perceive Reckitt, pointing to increased brand investment, higher capital expenditure and a new organisational structure as evidence that recent progress is sustainable.
The stock trades at around a 20% discount to the average valuation of European food and household products peers, despite what UBS characterises as top-quartile organic sales growth prospects.
In early afternoon trading, the stock was 2.4% at 5,562p.