Reckitt, the Consumer Defensive sector company, was revisited by a Wall Street analyst today. Analyst David Hayes from Jefferies maintained a Hold rating on the stock and has a p5,000.00 price target.
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David Hayes has given his Hold rating due to a combination of factors surrounding Reckitt’s recent strategic decisions. The company has confirmed the sale of its Essential Home unit to Advent Private Equity for an enterprise value of £3.6 billion. However, the net value of this transaction is estimated to be around £3 billion, which is significantly lower than the initial expectations of up to £6 billion. This discrepancy has raised concerns about the effectiveness of Reckitt’s strategic shift towards focusing solely on its core operations.
Furthermore, the sale is not a complete exit, as Reckitt retains a 30% stake in the business, which complicates the transaction and limits the immediate financial benefits. The implied EV/EBITDA ratio of less than 7x also highlights potential risks associated with the valuation of different growth and margin prospects within the industry. These factors, combined with anticipated one-off costs of £600 million, have led to a cautious outlook, justifying the Hold rating as investors await further developments, particularly regarding ongoing litigation.
In another report released today, Barclays also maintained a Hold rating on the stock with a £53.00 price target.
Based on the recent corporate insider activity of 14 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of RKT in relation to earlier this year.