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Continuing caution around Reckitt (RKTLN A-/A3) & Abbott Industries (ABT Aa3/AA-)

CONSUMER STAPLES
  • Analyst estimates on Reckitt's NEC linked claims losses now range from £8b (Jeffries) to worst case scenarios of £23.6b (Bernstein) - as a reminder RKTLN generates ~£2b/yr in FCF with net debt of £7.2b.
  • We'd also note unlike Bayer 1) it hasn't provisioned for this (Bayer has €5.5b) 2) it is the first case in reportedly "hundreds" (Bayer is through most) & 3) & has no track-record (Bayer has achieved avg. 90% reduction in awards) - i.e. the uncertainty for RKTLN is a lot higher & the first case is a poor start (Jury awarded $60m which was $25m above what Plaintiff was seeking).
  • There is a reported pooling of ~400 hundred cases at the Federal level - these are NEC cases in premature babies in NICU against both Similac (baby formula produced by Abbott) & Enfamil (Rickett).
  • ABT lines did not move on Friday, its a $ heavy issuer with only 3 € lines.
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  • Analyst estimates on Reckitt's NEC linked claims losses now range from £8b (Jeffries) to worst case scenarios of £23.6b (Bernstein) - as a reminder RKTLN generates ~£2b/yr in FCF with net debt of £7.2b.
  • We'd also note unlike Bayer 1) it hasn't provisioned for this (Bayer has €5.5b) 2) it is the first case in reportedly "hundreds" (Bayer is through most) & 3) & has no track-record (Bayer has achieved avg. 90% reduction in awards) - i.e. the uncertainty for RKTLN is a lot higher & the first case is a poor start (Jury awarded $60m which was $25m above what Plaintiff was seeking).
  • There is a reported pooling of ~400 hundred cases at the Federal level - these are NEC cases in premature babies in NICU against both Similac (baby formula produced by Abbott) & Enfamil (Rickett).
  • ABT lines did not move on Friday, its a $ heavy issuer with only 3 € lines.