Reckitt Benckiser Group plc Just Missed Earnings - But Analysts Have Updated Their Models
There's been a notable change in appetite for Reckitt Benckiser Group plc (LON:RKT) shares in the week since its full-year report, with the stock down 14% to UK£49.98. Statutory earnings per share fell badly short of expectations, coming in at UK£2.29, some 31% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at UK£15b. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Reckitt Benckiser Group after the latest results.
Check out our latest analysis for Reckitt Benckiser Group
Taking into account the latest results, Reckitt Benckiser Group's 15 analysts currently expect revenues in 2024 to be UK£14.6b, approximately in line with the last 12 months. Statutory earnings per share are predicted to leap 42% to UK£3.25. In the lead-up to this report, the analysts had been modelling revenues of UK£14.9b and earnings per share (EPS) of UK£3.45 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
The consensus price target held steady at UK£61.77, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Reckitt Benckiser Group analyst has a price target of UK£71.70 per share, while the most pessimistic values it at UK£46.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Reckitt Benckiser Group's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 0.08% growth on an annualised basis. This is compared to a historical growth rate of 3.1% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 2.4% annually. Factoring in the forecast slowdown in growth, it seems obvious that Reckitt Benckiser Group is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Reckitt Benckiser Group's revenue is expected to perform worse than the wider industry. The consensus price target held steady at UK£61.77, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Reckitt Benckiser Group going out to 2026, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Reckitt Benckiser Group that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
