24th Jun 2022 15:19
(Alliance News) - Barclays on Friday backed Reckitt Benckiser Group PLC to lift its annual outlook when it reports interim results next month.
Reckitt shares were 1.1% higher at 6,242.00 pence each in London on Friday afternoon. Shares have fallen 1.6% so far this year.
The investment bank said the consumer goods firm's guidance "looks conservative". Reckitt reports interim results on July 27.
Barclays rates Reckitt at 'overweight'. It cut its price target to GBP86 from GBP93, though put this down to a sector derating.
For the second quarter alone, Barclays expects to see 7.4% organic sales growth from Reckitt.
"We expect an exceptionally strong performance in Nutrition driven by share gains in US infant formula following widely publicised Abbott supply chain issues," Barclays explained.
The US has faced reduced supplies of infant formula in February after Abbott Nutrition, the largest US infant formula manufacturer, closed its plant in Sturgis, Michigan and recalled its most popular powder formulas, including Similac, Alimentum, and EleCare, after reporting bacterial infections and related deaths in babies.
To meet the severe supply shortage, the FDA later urged infant formula manufacturers worldwide to import products to the US.
Barclays also tips strong growth at Reckitt's Health arm, helped by improved cold and flu over-the-counter drug sales and fortunes at Dettol, a disinfectant brand.
The Hygiene arm, however, will see a weaker performance amid tough comparatives, Barclays said.
"We previously looked for 8.9% organic sales growth in 2Q22e, but downgrades to our Hygiene numbers more than offset modest increases to our Health and Nutrition forecasts," Barclays said.
Looking ahead, Barclays expects guidance upgrades from Reckitt.
"Reckitt's guidance of 'the upper end of 1-4% organic sales growth' looks conservative to us, and we expect it to be raised."
Reckitt in April reported a small fall in revenue in the first quarter of 2022; however, it said it expects 2022 like-for-like net revenue growth at the upper end of its guidance.
Net revenue in the first quarter fell 2.3% year-on-year to GBP3.42 billion from GBP3.51 billion. On a like-for-like basis, it was up 5.6%.
By Eric Cunha; [email protected]
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