Ariel Global Fund on Reckitt Benckiser Group plc
Thesis
Ariel reestablished Reckitt at what it considers an unjustified discount to consumer staples peers. Nearly half of its core revenue comes from faster-growing emerging markets, and the company owns established health and hygiene brands. Recent results were depressed by weak seasonal cold and flu demand, stranded costs and infant formula litigation. With margins improving and the first liability trial ending favorably, the fund sees scope for stronger earnings than consensus valuation implies.
“trade at an unwarranted discount to their consumer staples peers”
Key risks
- Weak cold and flu sales
- Stranded costs from portfolio actions
- Continuing infant formula liability litigation