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Healthcare stock Reckitt Benckiser, which reports full year results for 2017 this Monday, has already cut its organic sales growth target for the year on two occasions (from 3% to 2% and then to flat). We’ve seen disappointing numbers from a number of other consumer staples like Procter & Gamble, so the company’s leadership will be looking to emphasise the positives on Monday when it publishes full year results.

Reckitt Benckiser shares were once riding high

Reckitt Benckiser shares were once riding high, at over 8000 in July 2017. Since then they have slumped considerably, hitting bottoms of 6361 on 4 December and 6310 earlier this month. There is an established resistance level of about 6300 for Reckitt Benckiser shares, but there has been a noticeable uptick of interest in the last week or so, which may presage some more positive news on Monday.

Like for like sales were in negative territory in Q2 and Q3 last year, and analysts will be expecting an update on Reckitt Benckiser’s structure. Since CEO Rakesh Kapoor took over there has been quite a bit of messing around with this, including the creation of two units, RB Health and RB Hygiene. The health unit will include Mead Johnson, which Reckitt Benckiser bought last summer for almost £18 billion. Currently Kapoor’s plan seems to be to strip the overlapping costs between the purchase and Reckitt’s existing management structure.

“Watch also for any comments on further acquisitions as Reckitt is thought to be a possible bidder for the consumer healthcare operations of Pfizer, which are up for sale with a rumoured $20 billion price tag,” says Tom Selby, Senior Analyst with AJ Bell.

Looking at the headline numbers, sales were £9.9 billion in 2016 and the market will be looking for an improvement on this. Earnings per share (EPS) were 325 pence in 2016 and dividends per share was 175.9 pence.

The market is very focused on the possible acquisition of a piece of Pfizer, for which it could be bidding against GlaxoSmithKline. But investors and analysts are not convinced that such an acquisition would necessarily be a good thing for Reckitt, although they seem to feel Reckitt is better positioned to digest such a deal than rival GSK.

The Armchair Trader says:

Looking at the performance of the shares of both drugs firms in the last 12 months, we can’t say we’re that impressed. They are both down on a year ago although Reckitt Benkiser shares are doing better out of the pair. Still, they are both under performing the FTSE 100 index by a considerable margin. The question for investors is really whether Reckitt Benkiser shares look like a solid growth opportunity for the next 6-12 months. Big investors tend to turn to companies like these as defensive plays when the rest of the economy is in trouble, but that level of pessimism is not evident yet. Having said that, there has been some substantial buying of the stock last week, so there are some investors out there anticipating good news.

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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