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Investing.com -- Shares of Reckitt Benckiser (LON:RKT) fell on Thursday as investors reacted to mixed quarterly results and cautious guidance.
While the company delivered a 10.6% EPS beat at 349p—helped by cost savings and a lower tax rate—organic sales growth of 4.6% fell short of the 5.3% consensus.
The Health segment underperformed, rising just 2.4% versus expectations of 6.9%, largely due to a weak cold and flu season.
Hygiene and Nutrition performed better, with Nutrition posting 8.4% growth, well ahead of the 4.6% forecast.
Analysts at Morgan Stanley (NYSE:MS) and Barclays (LON:BARC) flagged Reckitt’s strong cost-cutting progress. Fixed costs declined by 90bp in FY24, reversing a 50bp increase in the first half, suggesting accelerated savings.
The company is targeting a 300bp reduction by FY27, with some reinvestment evident in a 30bp rise in BEI.
These efficiencies helped drive EBIT margins to 24.5%, a 120bp beat versus consensus, despite headwinds from seasonal OTC sales. However, analysts remain cautious about Reckitt’s ability to translate these savings into sustained revenue growth.
Guidance for FY25 remains conservative, with core sales projected to grow between 3-4%, below some investor expectations.
Group organic sales are forecast at 2-4%, with Essential Home and Mead Johnson Nutrition expected to see low-single-digit growth, or even declines in the first half of the year.
Additionally, finance cost guidance of £350-370m exceeds the £309m consensus estimate. The dividend has been raised by 5%, but there was no update on NEC litigation or speculation surrounding the sale of Essential Home.
Barclays adjusted its outlook slightly, raising its price target to £56 from £53.60 on the back of improved margins, while cautioning that Reckitt’s transformation remains a near-term earnings drag.