Reckitt Benckiser has had a ‘buy’ view reiterated by Royal Bank of Canada (TSX:RY) analysts, who hope management’s assertion that things are about normalise proves accurate.
“In the absence of further one-offs, and with a chief executive announcement expected during the first half of 2023, we believe that Reckitt's undervaluation will become increasingly apparent.”
RBC adds that Reckitt has addressed many of the shortcomings that stemmed from underinvestment by the previous management regime.
Investment in R&D has risen from 10% of marketing to almost 20%, which RBC highlights as particularly important given Reckitt's exposure to the more 'science-y' categories in consumer staples land and its historical tendency to over-innovate - roll out and charge more for new products which offer little incremental benefit.
Secondly, the potential disposal of its Infant Nutrition business brings optionality, RBC said.
Reckitt could spend the cash on a sizeable share buyback or further acquisitions in Consumer Health.
RBC’s price target is 7,600p against 5,918p, up 1.2% today.