Reckitt Benckiser Shares Have Tumbled – Here’s Why

Reckitt Benckiser (LON: RKT), the Anglo-Dutch consumer goods giant behind Dettol disinfectant and many other major brands, has seen its shares tumble over the last couple of months. This decline stems from a double whammy of disappointing sales figures and a hefty legal setback.

RKT's stock has fallen more than 23% this year and over 27% in the last three months alone. Its shares now trade at levels last seen in 2013.

In late February, Reckitt Benckiser shares plunged after its fourth-quarter results fell short of analyst expectations. Like-for-like sales growth in the three months to December 31 declined by 1.2%, compared to a 5.6% increase in the same quarter a year ago. This was below the market consensus, which had expected growth of 1.8%.

Meanwhile, revenue during the period fell 7% to £3.56 billion from £3.83 billion a year ago.

Further dampening investor sentiment is a recent US legal case. A jury awarded $60 million to a mother who claimed her child died after consuming Reckitt Benckiser's Enfamil baby formula. This verdict raises concerns about potential future liabilities from similar lawsuits. Following the news, RKT shares plummeted and have yet to see any signs of a recovery.

These factors have combined to erode investor confidence in Reckitt Benckiser, leading to a significant drop in share price. The company will need to address both its slowing sales growth and the legal challenges to regain investor trust and stabilize its stock price.

In early April, RBC Capital cut its price target for RKT to 5,000p from 7,000p, maintaining an Outperform rating on the stock. Analysts at the firm said, “Reckitt is over-earning, reflecting historical reluctance to invest in infrastructure.”

“This has left Reckitt vulnerable to unforeseen mishaps and undermined its resilience,” added RBC, which feels Reckitt's new top team “needs to get to grips with this quickly.”