Berenberg raises target price on Reckitt Benckiser

Berenberg noted that Reckitt Benckiser had ended the year "strongly", with like-for-like sales growth of 10.2% year-on-year in the fourth quarter, resulting in 11.8% like-for-like sales growth in 2020 as a whole.

At the group level, Berenberg said this result was in line with visible alpha consensus expectations. However, at the divisional level, the 25.7% acceleration in hygiene was "a positive surprise", while the 2.8% slowdown in health and the 3.5% drop in nutrition were both higher than expected, owing to an "unfavourable cough and cold season" and challenges in its Chinese infant formula business.

The German bank, which reiterated its 'buy' rating on the stock, pointed out that operating margins of 23.6% for 2020 were "a touch light" of consensus forecasts for a print of 23.8% but also noted that adjusted earnings per share of 327.0p were in line.

However, Berenberg said it remains "confident" that improved execution was underpinning "a structural improvement" in the company’s like-for-like sales growth profile and stated this was yet to be reflected in the stock's valuation.