Broker snap: Cash burning a hole in Reckitt's pocket

6th Oct 2009 13:02

JPMorgan Chase reckons there is scope for upward revisions to earnings forecasts at Reckitt Benckiser, driven by increased sales and improved margins.'We see room for positive earnings revisions from better top line and operating margins for the core business and potentially milder profit erosion in US pharma. Yet, the market does not seem to have taken notice as the stock trades just in line with peers,' the US bank notes.JPMorgan (JPM) has an 'overweight' recommendation for the shares and a price target of £33.JPM reckons the cash rich firm could soon be on the acquisition trail to beef up its health and personal care business. 'At the first half analyst presentation, management stressed the difficulties to grow the health and personal care Latin American business without the appropriate distribution platform and that Japan offered strong opportunities in OTC [over the counter] given the high GDP [gross domestic product] per capita,' JPM said.Bearing in mind the company has previously expressed an ambition to hold strong positions in key categories, JPM speculates that the Cillit Bang and Dettol maker will seek to boost its presence in the over the counter market, particularly in the categories of analgesics, cold & flu and gastrointestinal.