On Tuesday, RBC Capital Markets adjusted its price target on shares of Reckitt Benckiser Group PLC (LON:RKT:LN) (OTC: RBGLY), a leading consumer health and hygiene company. The firm reduced the price target to £5,000 from the previous £7,000, while maintaining an Outperform rating on the stock.
The adjustment follows RBC Capital's analysis that Reckitt has been "over-earning," a situation attributed to a historical hesitancy to invest sufficiently in infrastructure. This underinvestment has reportedly made the company more susceptible to unexpected issues, compromising its ability to effectively manage unforeseen challenges.
RBC Capital has revised its EBIT margin forecasts for the year 2025 and beyond, reducing them by more than 300 basis points. This revision reflects concerns about the company's operational resilience and market position.
In addition to the margin forecast changes, RBC Capital has incorporated a £2 billion liability for NEC litigation into its valuation models. This litigation cost is expected to impact the company's financial outlook.
The firm also increased the assumed cost of equity by 50 basis points. This change is due to heightened uncertainty, which could potentially affect the company's performance and investor confidence.
Despite the reduced price target, RBC Capital maintains its Outperform rating on Reckitt Benckiser. The firm's Adjusted Present Value (APV) derived price target now stands at £50, down from the previous £70.
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