Reckitt Benckiser Group PLC (LSE:RKT, ETR:3RB) reported a robust first quarter, signalling significant operational improvements under its new leadership, according to research by UBS.
This comes after a year marked by challenges, notably in the US nutrition sector which had affected previous quarterly performances.
The Swiss bank noted the latest trading update from Reckitt, maker of household staples such as Vanish and Harpic, exceeded expectations with a 1.5% increase in like-for-like sales, which was ahead of the consensus estimate of a 0.9% decline.
This performance reflects a tangible shift in operational dynamics across all three of the company’s divisions, buoyed by resilient price/mix contributions and volume growth.
The investment bank remains optimistic about Reckitt's strategic direction, forecasting a 3.2% like-for-like sales growth for 2024, accompanied by a 30 basis point improvement in operating margin.
This outlook is supported by the emergence of three growth engines within the company’s portfolio, which are expected to contribute significantly to its revenue streams and enhance gross margin profiles.
Furthermore, UBS anticipates that adjustments in retailer stock levels in the Cough & Cold categories will be completed by the end of April, paving the way for sustained growth in these key areas.
Regarding valuation, UBS finds Reckitt Benckiser's stock to be undervalued, trading at a 60% discount to its peers, with shares priced at 12 times the projected earnings for 2025.
The bank thinks the shares are worth 7,170p compared with the current price of 4,341p.