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On Tuesday, Deutsche Bank (ETR:DBKGn) analysts updated their outlook on Reckitt Benckiser (LON:RKT:LN) (OTC: RBGLY), increasing the price target from £50.00 to £54.00 while maintaining a Hold rating on the stock. The adjustment follows Reckitt Benckiser’s recent announcement of better-than-expected results and the likelihood of achieving their fixed cost reduction target.
Analysts at Deutsche Bank highlighted Reckitt’s progress, noting the potential for cost savings as evidenced by the examination of the UK subsidiary accounts, which revealed excess in some of the UK fixed costs. Despite these positive developments, the analysts pointed out that there are still challenges ahead for the company that could impact growth.
The report identified several headwinds that may affect Reckitt Benckiser’s top line growth. These include a slowdown in household growth, normalization of cough and cold markets, and an increase in breastfeeding rates. Such factors are anticipated to pose obstacles to the company’s ability to significantly increase its stock value.
In addition to the concerns about growth, Deutsche Bank’s analysis suggests that Reckitt Benckiser’s underlying gross margins might face additional pressure. The analysts cited lower depreciation, foreign exchange transaction gains, and the reversal of last year’s accounting hedges as contributing factors that could potentially squeeze margins.
The update from Deutsche Bank provides investors with a revised financial outlook for Reckitt Benckiser, reflecting both the company’s recent achievements and the challenges it may encounter moving forward. The new price target of £54.00 represents a modest increase, indicating a level of caution from the analysts regarding the company’s growth prospects amid the identified headwinds.
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