Jefferies upgrades Reckitt to buy, arguing market has over-punished transitory setbacks Proactive uses images sourced from Shutterstock
Jefferies has upgraded Reckitt Benckiser Group PLC (LSE:RKT, FRA:3RB, XETRA:3RB)to ‘buy’ from ‘hold’, raising its price target to 5,900p from 5,600p ahead of half-year results next week.
The broker argues the market has overly discounted a run of setbacks that hit the consumer goods group in early 2026, most of which it classes as one-off and unlikely to recur beyond this year.
Reckitt shares have fallen around 15% so far in 2026, against an 8% gain for the broader European market, leaving the stock trading at 14.5 times forecast earnings compared with 18 times at the start of the year.
Analyst David Hayes points to three “binary” events behind the first-quarter sales miss, when like-for-like growth came in at 1.3% against consensus of 3%.
Changes to Russian sanctions rules on household goods removed roughly £26 million of sales, while Chinese regulatory intervention in intimate wellness, including the imposition of VAT on condoms after a 30-year exemption and tighter advertising restrictions, cost a further £12 million.
A weak cold and flu season compounded the problem, with seasonal self-care sales down around 10% year on year.
Strip those out, Jefferies calculates, and the remaining 80% of the business grew at 5%.
The bank expects a formal guidance cut at the 29 July results, with core organic sales growth trimmed to around 4% from the current 4% to 5% range, and operating margin guided to just below last year’s 24.9%.
It views that reset as a clearing event rather than a fresh blow, removing the uncertainty keeping investors on the sidelines.
A second potential clearing event comes in late August, when a jury delivers its verdict in the latest bellwether case over necrotising enterocolitis claims linked to Mead Johnson infant formula.
Jefferies continues to assume an £800 million total liability and believes the market already anticipates a verdict for the plaintiffs.
Resolution of the litigation is seen as a prerequisite for the planned disposal of the Mead Johnson nutrition arm, which Jefferies values at eight times earnings before interest, tax, depreciation and amortisation, or roughly £4 billion gross.
The bank forecasts like-for-like growth of 4.5% at core Reckitt in 2027, a level it thinks could trigger a re-rating towards 15.8 times forward earnings.