Broker snap: Respectable performance from Reckitt

26th Jul 2010 11:37

Second quarter results from household goods maker Reckitt Benckiser beat expectations but there remain 'underlying weaknesses that are niggling the market', Panmure Gordon avows.Europe was one of those niggling worries, with sales declining by 1% in the second quarter when Panmure Gordon had been expecting growth of 1% year on year. Fabric sales also continue to disappoint, with sales down 3% when the broker had expected them to be flat."The markets concerns about weak performance in Europe and Fabric (largely the same issue) are not going to be alleviated by these results, but Reckitt is clearly set to deliver, in our view, another year of double-digit growth, with the Suboxone hit now moving to 2011E [2011 earnings]," Panmure Gordon said."We believe 5% base sales growth in such tough conditions is perfectly respectable, and believe costs are largely covered for the year. We reiterate our Buy recommendation and 3800p price target," the broker concluded.Commerzbank is another broker with a "hold" rating on the shares, though its price target is only 3300p.It notes that full year profits guidance from the company has been left unchanged, "however, the current absence of competition from generics to Suboxone implies upside to our forecast for the Pharma segment," in the view of Commerzbank analyst Andreas Riemann.