On Tuesday, Citi maintained its Buy rating and GBP57.00 price target for Reckitt Benckiser (LON:RKT:LN) (OTC: RBGLY), following a recent legal development. A jury has awarded substantial damages against Abbott, with Reckitt Benckiser receiving a $60 million compensatory damages award. Citi's analysis includes a theoretical increase in Reckitt's liability overhang from USD4 billion to USD6 billion due to the verdict.
The implications of the jury's decision suggest potential delays for Reckitt Benckiser's planned exit from its Mead Nutrition business. Originally anticipated to occur before the first half of 2025, the timeline may now extend beyond this period. The extended litigation risk is expected to be a factor for any prospective buyers of the division.
Citi's assessment also indicates that the additional USD1.5 billion in potential liabilities could reduce Reckitt Benckiser's share price by GBP2 from its current valuation. Despite the litigation concerns and the complexities surrounding the Mead exit, the firm's valuation includes a conservative sum-of-parts (SOP) analysis, accounting for litigation, Home stranded costs, and tax.
The financial institution acknowledges the challenging environment for Reckitt Benckiser to navigate through the first half of 2025. The company's share price and market performance will likely be influenced by how it addresses these legal and operational challenges in the coming months.
InvestingPro Insights
As Reckitt Benckiser (OTC: RBGLY) faces extended litigation risks and potential delays in divesting its Mead Nutrition business, the company's financial metrics and management strategies become increasingly relevant to investors. According to real-time data from InvestingPro, Reckitt Benckiser boasts an adjusted market cap of $36.71 billion and an impressive gross profit margin of 60.56% for the last twelve months as of Q2 2024. The company's commitment to shareholders is evident, having maintained dividend payments for 33 consecutive years, with a current dividend yield of 3.6%. Despite a recent downturn in revenue growth, with a -4.55% change over the last twelve months as of Q2 2024, Reckitt Benckiser's management has been aggressively buying back shares, which could signal confidence in the company's future performance.
InvestingPro Tips highlight that while the stock is trading near its 52-week low, analysts predict the company will be profitable this year, having been profitable over the last twelve months. This could present a buying opportunity for long-term investors. For those looking to delve deeper into Reckitt Benckiser's prospects, additional InvestingPro Tips are available, offering a comprehensive analysis of potential investment strategies. To access these insights and more, investors can use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, which includes a total of 8 InvestingPro Tips for Reckitt Benckiser.
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