On Thursday, CFRA maintained a Hold rating on Reckitt Benckiser (LON:RKT:LN) (OTC: RBGLY), but reduced the 12-month price target from GBP58.00 to GBP48.00. The revised target reflects a forward P/E of 14.5x, which is below the company's 5-year historical average of 19.0x. This adjustment is attributed to the negative market sentiment following recent legal challenges faced by the company's Nutrition unit.
Reckitt Benckiser's legal difficulties arose when it was ordered to pay a $60 million compensation related to its Nutrition division. Although the company has expressed its intention to challenge the verdict, concerns over additional potential liabilities and the erosion of consumer confidence are weighing on the stock. The company's Nutrition segment reported a significant decline in net revenue growth for Q4 2023, with a like-for-like decrease of 14.8%.
Despite the challenges in the Nutrition segment, CFRA acknowledges the strength of Reckitt Benckiser's Health and Hygiene segments. However, the firm sees no immediate positive drivers for the stock until the company addresses its legal issues and finds a way to reinvigorate growth.
The firm had previously downgraded the stock to Hold due to skepticism about the company's ability to sustain its market-leading growth, and that position remains unchanged.
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