Broker snap: Investec upgrades Reckitt after confident outlook

22nd Oct 2013 09:53

Investec has upgraded its rating for household products firm Reckitt Benckiser from 'sell' to 'hold' on the back of the company's upbeat outlook with its third-quarter results.Figures from the Cillit Bang and Dettol maker beat expectations on Tuesday morning, with like-for-like revenue growth excluding Reckitt Benckiser Pharmaceuticals (RBP) coming in a 5%, ahead of the consensus forecast of 4.6% of Investec's estimate of 4.3%.The broker said that comparatives going into the fourth quarter will become tougher due to a strong cold and flu season in 2012, but the update "signals positive momentum to us".Analyst Martin Deboo said he was impressed by the company's "confident tone and strength in depth" in its outlook. "The key emerging-market region of LatAm Pacific grew 10% and Europe North America remained in growth against toughening comps, as improved investment & execution bore fruit," he commented."Critically, the decision to conduct a 'strategic review' of RBP signals an intent to exit, in our view, and a move to resolve a troublesome valuation hangover, once and for all."Deboo added that a "demanding" valuation prevents him from becoming more positive on the stock. "But we think the vista is getting sunnier for Reckitt. Move to 'hold'."The stock was up 5.89% at 4,765p by 10:01 on Tuesday.BC