Reckitt Benckiser shares surged on Thursday after the consumer-goods company reported better-than-expected performance in its core business, beat profit forecasts, and raised its full-year outlook, signalling growing confidence in its turnaround under CEO Kris Licht.
The British multinational, whose products include Dettol disinfectants and Durex condoms, said its second-quarter net revenue fell 3.8% to £3.3 billion ($4.48 billion) compared with the same period last year.
However, revenue from its core segment grew 5.3% in the quarter, handily beating consensus expectations of 3.4%.
“We think today’s results further demonstrate the strength of Core Reckitt,” Morgan Stanley analysts said in a note to clients.
The stock was up more than 10% in European morning trading, marking its biggest one-day jump since November 2008, and was among the top performers on the FTSE 100 index.
It is up more than 14% so far this year.
Profit beat and cost savings bolster investor confidence
Reckitt’s adjusted operating profit for the first half of 2024 rose 1.8% year-on-year to £1.71 billion ($2.32 billion), ahead of the company-compiled consensus of £1.66 billion.
This was driven by efficiency improvements and early realization of cost-saving measures.
The company maintained its earnings per share outlook, with many analysts noting that markets had been bracing for a cut due to adverse currency movements.
While pretax profit declined to £1.31 billion from £1.52 billion a year earlier, Reckitt’s margin discipline and streamlined operations have helped protect bottom-line performance.
The board declared an interim dividend of 84.4 pence per share, up from 80.4 pence a year ago.
In a further vote of confidence, Reckitt also announced a £1 billion share buyback program to be executed over the next 12 months.
Outlook raised, but non-core drag remains
The company upgraded its forecast for group like-for-like net revenue growth to 3–4% for the full year, from a prior range of 2–4%.
It also expects its core business to expand above 4%, up from an earlier estimate of 3–4%.
“A beat and raise is a rare occurrence in this market,” said analysts at JPMorgan in a note.
The 2025 outlook for core growth has been similarly raised.
However, non-core units, including Mead Johnson (its infant nutrition brand) and Essential Home (its homecare unit), fell short of expectations and continued to weigh on overall performance.
Reckitt recently agreed to sell a majority stake in Essential Home to private equity firm Advent for $4.8 billion and is evaluating strategic options for Mead Johnson, which faces legal challenges related to baby formula in the US
Barclays analysts noted that investor focus is likely to remain on the company’s core segment, which is delivering robust growth.
CEO Licht eyes US investments to boost supply chain resilience
Reckitt’s exposure to US tariffs remains a concern for some investors, especially when compared with rivals like Haleon and Unilever that have higher domestic production capacity.
Currently, only 57% of Reckitt’s US sales come from local production.
However, this is expected to increase to 75% once a new factory in North Carolina begins operations in 2027.
CEO Kris Licht said the company is evaluating additional US investments to “increase capacity and support innovation.”
In an interview, Licht added that input cost trends in the US remain “fairly benign,” and that Reckitt is currently “not really moving our prices a lot right now, up or down.”
While the litigation tied to Mead Johnson could impact the timing of an eventual exit from the business, Licht emphasized the company’s focus on strengthening its core and reshaping its portfolio.
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