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Reckitt (RKTLN; A3 Pos, A- S)

CONSUMER STAPLES
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  • Activist investor Eminence has built "at least a 0.5% stake" in Reckitt, FT reports this morning. It is fanning a renewed discussion on a potential sale of the infant formula business, Mead Johnson, which was acquired for $17b in 2017. Nutrition contains two brands; Enfamil (lawsuit tied) and Nutramigen & together made up 16% of revenue & 13% of adj. operating profit for the group in FY23.
  • It has been a while since we mentioned Reckitt - part of that is on the curve not being wide enough to make it interesting - spreads have had support from Moody's affirming it at A3 Pos & equity analyst optimistic takes (many of which are warranted). It doesn't trade far off General Mills (Baa2/BBB) & still inside high-grade Tobacco (PM) & Couche-Tard.
  • As we mentioned previously, legal risk is still there; bulk federal cases are the real threat (to rising litigation costs) and they are yet to start/roll over (and will take time to do so). Next catalyst for repricing that risk is appeal results on the first state loss (not mgmt reiterating it won't provision).
  • Q1 earnings call (late April); https://marketnews.com/reckitt-rktln-a3-pos-a-s-rk...
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  • Activist investor Eminence has built "at least a 0.5% stake" in Reckitt, FT reports this morning. It is fanning a renewed discussion on a potential sale of the infant formula business, Mead Johnson, which was acquired for $17b in 2017. Nutrition contains two brands; Enfamil (lawsuit tied) and Nutramigen & together made up 16% of revenue & 13% of adj. operating profit for the group in FY23.
  • It has been a while since we mentioned Reckitt - part of that is on the curve not being wide enough to make it interesting - spreads have had support from Moody's affirming it at A3 Pos & equity analyst optimistic takes (many of which are warranted). It doesn't trade far off General Mills (Baa2/BBB) & still inside high-grade Tobacco (PM) & Couche-Tard.
  • As we mentioned previously, legal risk is still there; bulk federal cases are the real threat (to rising litigation costs) and they are yet to start/roll over (and will take time to do so). Next catalyst for repricing that risk is appeal results on the first state loss (not mgmt reiterating it won't provision).
  • Q1 earnings call (late April); https://marketnews.com/reckitt-rktln-a3-pos-a-s-rk...