James Gard: Welcome to Morningstar.
Our latest stock of the week is Reckitt, which has just released its latest full-year figures. Despite a mixed set of numbers, the company’s shares rose nearly 5% on Thursday and another 3% on Friday.
The hygiene and healthcare firm made a loss in 2021 after taking disposals into account. Reckitt, like rival Unilever, has warned on inflationary pressures, which customers assume means higher prices. But the company’s chief financial officer Jeff Carr says that Reckitt plans to absorb these pressures by cost cutting and better buying.
Reckitt’s portfolio includes well-known brands like Dettol, Cillit Bang, Nurofen and Strepsils.
So what explains the bounce in the share price? Investors liked Reckitt’s forecasts for higher profit margins this year. And AJ Bell analyst Danni Hewson thinks many of its brands are likely to provide a safe haven in an inflationary environment. Shoppers will trade down to home brands in certain categories like food but are less likely to for cough and cold medicines.
We last looked at the company in September 2021, when shares were trading at £56 and they’re now trading just above £60. But our analysts assign this wide moat company a fair value of £65 per share. The dividend was left unchanged and Reckitt now yields around 3%.
For Morningstar, I’m James Gard