Berenberg lowers target price on Reckitt Group

Analysts at Berenberg lowered their target price on consumer goods company Reckitt Group from 8,500.0p to 7,870.0p on Wednesday, stating effects stemming from the Covid-19 pandemic had made their mark on the firm.

Berenberg said "challenging comparables", social mobility and input cost pressures had taken their toll on Reckitt's performance in the second quarter, with like-for-like sales declining 1.0%, missing consensus expectations for an increase of 1.9%.

The German bank noted that the miss was driven by declines in the firm's health and nutrition divisions and below expectation operating margins of 21.6%. Adjusted earnings per share of £1.42 also missed consensus expectations by 2%.

Berenberg, which reiterated its 'buy' rating on the stock, added that Reckitt's results did not invalidate its investment thesis on the firm, which was based on improved execution and 3.9% organic sales growth in the medium term.

"We accept however, the near-term risk of stock volatility, at least until the base (ie post-Covid-19 levels of consumer demand for key categories) is better understood," concluded the analysts.