Shares of British consumer goods company Reckitt Benckiser (GB:RKT) rallied more than 8% as of writing, after winning a favorable ruling from a U.S. court in a premature baby formula lawsuit. A jury cleared Reckitt’s unit Mead Johnson and Abbott Laboratories (ABT) of allegations that their baby formulas caused a life-threatening intestinal disease in a child and that they failed to warn of the risks related to their products. ABT shares were up 5% in pre-market trading.
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The plaintiff, Kaine Whitfield (the child’s mother), had urged jurors to award over $6.2 billion in this lawsuit.
More on Reckitt and Abbott’s Big Legal Win
The favorable verdict for Reckitt came after previous rulings resulted in fines of $60 million against Reckitt and $495 million against Abbott in similar cases. Interestingly, following the earlier verdicts, a working group of scientists convened by the National Institutes of Health and U.S. regulatory agencies said that the current evidence does not indicate that the infant formulas made by these companies cause an intestinal disease called necrotizing enterocolitis.
Meanwhile, analysts at Jefferies noted that the latest verdict marks the first positive outcome for Reckitt’s Mead Johnson unit and Abbott and could address concerns on final settlement liabilities. Mead Johnson said the verdict “demonstrates that the claims in this case were not supported by the science or experts in the medical community.”
The legal troubles made Reckitt contemplate the disposal of some of its home-care brands and a strategic review of its Mean Johnson business. Currently, about 1,000 similar lawsuits are still pending against the two companies.
Is Reckitt a Good Buy?
With five Buys and seven Holds, Reckitt scores a Moderate Buy consensus rating on TipRanks. The average RKT stock price target of 5,393.36p implies about 6% upside potential. Shares are down about 2% year-to-date.
