Reckitt at end of long downgrade cycle - UBS

27th Jul 2018 12:20

(Sharecast News) - Reckitt Benckiser has reached the end of a long downgrade cycle, UBS believes, though the shares are around "fair value" after recent strength.The consumer products group beat City forecasts with 4% growth in second quarter like-for-like sales, up 5% on a pro-forma basis including its Mead Johnson Nutrition acquisition. First-half EBIT margin was down slightly but still beating consensus forecasts, meaning first-half EPS of 140p, 2% above consensus, and full year guidance was raised slightly."This quarter marks the end of a long downgrade cycle for RB, in our view," said UBS analysts in a note to clients. At 18 times 2019 forecast earnings, Reckitt shares trade at a 5% discount to the EU consumer staples sector, UBS said, having in the past five-years ranged between a 15% discount to a 20% premium. The shares yield around 2.9%."In light of improving (albeit still lacklustre) growth, we think this multiple looks fair."