Jefferies downgrades Reckitt, says vaccine rollout alters landscape

Jefferies downgraded its rating on shares of consumer goods giant and Dettol maker Reckitt Benckiser on Thursday to ‘underperform’ from ‘hold’ and slashed the price target to 5,845p from 7,100p.

The bank said that with a vaccine rolling out in 2021, it now expects a dual challenge in the form of weaker Hygiene from the second quarter onwards and a slow cold and flu season in Q4/Q1, as lockdowns continue.

It said the anticipated roll-out of the BioNTech/Pfizer and Moderna vaccines from the first quarter on alters the landscape. While Jefferies expect hygiene-consciousness to persist, it anticipates a pullback from elevated FY20 levels, "including lapping a mother of all comps in March".

The bank now expects top line earnings per share contraction of 4% and 10% and is 470 basis below FY21 OSG consensus in Hygiene, 550bps in Health and 360bps for the group.

"Beyond that, our concerns persist around the challenges of maturity in over the counter and the strategic bind in infant and child nutrition. The stock is a consensual long, FY21 numbers are too high and the recent modest relative correction isn't enough, in our view," it said.

At 1240 GMT, the shares were down 0.8% at 6,654.00p.