Reckitt Benckiser Group PLC (LSE:RKT, ETR:3RB) has been upgraded to 'hold' from 'underperform' by Jefferies, bumping its valuation up by £3 a share to £44.
In a note entitled Time To Use The Slack That's Been Given, the American investment bank points out the stock has fallen 23% year-to-date amid worries over the cost of baby formula litigation.
However, Jefferies is now less bearish on the potential legal costs, forecasts for which have been reduced from £4 billion to £1.5 billion.
There is some caution around potential short-term challenges. Its first-quarter sales momentum is unlikely to shift sentiment, the bank notes.
Looking ahead, Jefferies projects a more viable operating margin range of 20-21% for Reckitt Benckiser, adjusted down from 23.1% in 2023, as a realistic expectation for sustaining sales growth over the mid-term.
In late-morning trading, the stock was barely changed at 4,281p.