- Price
- $13.27 → $13.18(−0.7%)
- Discount
- 28.7% → 29.1%(+0.5 pts)
- Thesis
- RBGLYReckitt Benckiser trades around $13.27,at a discount because investors worry about 29% below the analysts' $18.60 fair value estimate. The market is worried about two overhangsissues. First, Mead Johnson: Reckitt has been tryingtried for two years to exit thesell its infant-formula business for two years, reportedly seeking around $7 billion versus the nearly $18 billion it paid in 2017, and a sale keeps getting complicated byunit. Lawsuits over necrotizing enterocolitis (NEC) litigation over, a serious bowel disease in premature babies linked to Enfamil formula, keep complicating a sale. Second, the numbers look messy after the Essential Home sale:divestment made adjusted earnings per share fell 9.7%fall sharply in H1 2026, simply because the profit that business used to contribute is gone. Underneath that, the ongoing business is accelerating: Core Reckitt's like-for-like revenue growth picked upmeans sales growth after removing the effect of currency swings and business changes. For the discount to close, that growth needs to keep accelerating past the 4.2% pace it reached in Q2 2026 from 2.7% in Q1, led by emerging markets, and management held full-year guidance of That would match the 4%-5% growth and 24.9%full-25year guidance management has held.6% operating margin A sale of Mead Johnson, even at a price much lower than what Reckitt paid in 2017, would remove a major distraction. It would let the market value the simpler remaining business on its own. Mead Johnson's also won its first federal bellwether NEC trial also ended in a defense verdict for Reckitt in August 2026, removingwhich removed one source of legal uncertainty, and Reckitt keeps returning cash through a rising dividend and a new buyback. If Core Reckitt's growth keeps compounding and Mead Johnson is eventually sold, even at a discount, for a clean break, the market could re-rate the simpler remaining business and the discount could close. The honest counter-case: hundredsHundreds of NEC lawsuits are still pending, though, and an earlier $60 million verdict against Mead Johnson was only reversed on appeal and sent back for retrial rather than dismissed. The next scheduled test is a Q3 trading update expected around late October 2026, which should give a fresh read on Core Reckitt growth. Further news on the Mead Johnson sale could arrive at any point, given how long that process has already run. If growth keeps compounding and Mead Johnson is fully sold, the discount could close within the next year. The main risk is that a large adverse NEC verdict, or a stalled sale process, could keep tying up capital and management attention well beyond 2026.
- Recent events
- 2026-09-16: Reckitt announced up to $600 million of multi-year investment in its US operations, including a new science and innovation campus in New Jersey and an expanded OTC manufacturing facility in North Carolina opening in H1 2027.
2026-09-01: J.P. Morgan upgraded Reckitt to overweight from neutral, coinciding with the Mead Johnson trial win. Reckitt shares rose 4.3% that day.
2026-08-31: A federal jury in Chicago returned a unanimous defense verdict for Mead Johnson in Inman v. Mead Johnson, the first bellwether trial to reach a verdict in the multidistrict NEC baby-formula litigation. Reckitt shares rose on the news.
2026-07-29: Reckitt reported H1 2026 results. Core Reckitt like-for-like net revenue grew 2.7% in H1, accelerating to 4.2% in Q2. Adjusted diluted EPS fell 9.7% to 152.1p, mainly due to the Essential Home divestment. The board raised the interim dividend 5% to 88.6p and announced a new buyback of up to £500 million over the next 12 months. Full-year guidance was maintained.
2026-06-12: The Illinois Fifth District Appellate Court reversed a $60 million jury verdict against Mead Johnson in Watson v. Mead Johnson, an NEC case, citing errors in jury instructions on the duty to warn, and sent the case back for a new trial.
2026-04-10: Press reports said Danone was exploring a bid for Mead Johnson Nutrition, with Reckitt reportedly seeking offers of around $7 billion, far below the nearly $18 billion it paid for the business in 2017.
2026-02-20: Reckitt paid a £1.6 billion special dividend (235 pence per share) to shareholders following the Essential Home sale, alongside a 24-for-25 share consolidation.
2025-12-31: Reckitt completed the sale of its Essential Home business (Air Wick, Calgon, Cillit Bang) to Advent International for $4.8 billion, retaining a 30% stake in the acquisition vehicle.