Reckitt Benckiser shares tipped to keep rising
Shares have rallied strongly since the summer and now trade at their highest in over two years, but the valuation gap still looks unwarranted. City writer Graeme Evans explains why.
22nd October 2025 13:43
by Graeme Evans from interactive investor
Vanish Gold carpet cleaner on a shop shelf. Photo: Igor Golovniov/SOPA Images/LightRocket via Getty Images.
A “sharper” Reckitt Benckiser Group (LSE:RKT) today provided fuel to a City firm’s bullish price target by disclosing a quarterly sales performance well ahead of consensus expectations.
China-led emerging markets growth of 15.5% drove the beat by the company’s core portfolio of consumer health and hygiene brands such as Harpic, Durex and Strepsils.
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The like-for-like sales growth rate of 6.7% for the third quarter compared with the City consensus of 5.5%, with the rate of volume growth up to 3.4% from 1.2% in the first half.
The group reiterated its 2025 guidance, which includes core underlying sales growth of more than 4%. This compares with the current year-to-date rate of 5%.
The results highlighted progress in the year since chief executive Kris Licht unveiled his strategy to rebuild Reckitt around leading consumer health and hygiene brands.
His plan included the divestment of homecare brands including Air Wick, Calgon and Cillit Bang, with a transaction expected before the year-end. Mead Johnson Nutrition is also non-core, having bought the US business in a 2017 deal that cost $17.9 billion including debt.
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The Essential Home operation posted a like-for-like sales decline for the quarter of 4.9%, which was slightly weaker than expected. Mead Johnson rose 22% as the business benefited from the lapping of the impact of a July 2024 tornado at a warehouse in Mount Vernon, Indiana.
The shares were at a decade low of 4,408p and an approximate 35% discount to peers in the European food, home and personal sector on the eve of the strategy update in July 2024.
They’ve since narrowed the gap after rallying by a third to today’s level of 5,860p, aided in recent weeks by the first £250 million tranche of a £1 billion buyback programme and a 5% increase in last month’s interim dividend to 84.4p a share.
The improvement has moved shares closer to UBS’s price target of 7,700p, which the Swiss bank put in place when shares were 4,950p
It has argued that Reckitt’s valuation gap looked increasingly unwarranted, adding that the core businesses should have a compelling and “clearly top quartile” earnings growth model.
In addition, the bank said that an ongoing cost optimisation plan should yield £450 million in savings over the next three years and allow higher investment.
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The primary risks to its base case, which points to a potential upside of more than 30%, include lower incidence of flu in the northern hemisphere and need for incremental investments.
Licht told investors today that Reckitt delivered a strong third-quarter performance, including a return to growth in developed markets against a challenging consumer landscape.
He added: “With our sharpened operating structure, we are executing our plan and progressing our strategic objectives to be a world-class consumer health and hygiene company.
“We are pleased with our performance and we are confident in delivering our full-year 2025 guidance.”
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