Today I am explaining why I believe shares in Reckitt Benckiser (LSE: RB) (NASDAQOTH: RBGLY.US) are set to march higher on the back of its powerful portfolio of household brands.
Blockbuster brands to deliver bountiful gains
Shares in household goods giant Reckitt Benckiser have shot higher in recent weeks, leaping more than 11% since in just over a fortnight and boosted by bubbly third-quarter financial results. Net revenues, on a constant currencies basis, rose 6% in the January-September period to £7.54bn, the company said.
And in my opinion the firm can look forward to further excellent revenues growth, with its galloping emerging market exposure and portfolio of industry-leading ‘Powerbrands‘ leading the charge. In particular, I believe that the strength of these 19 self-monikered labels are key to the firm’s future expansion story.
Reckitt Benckiser’s stable of premier labels are sold in more than 200 countries and include the likes of dishwasher cleaner Finish, sore throat reliever Strepsils and condom brand Durex, all three of which are the most popular global brands in their fields. And Reckitt Benckiser’s successful roll-out of these labels in new markets, combined with novel innovations across a multitude of these brands, are helping to drive revenues higher.
Indeed, brand strength here is helping to drive the firm’s push into exciting emerging regions, and Reckitt Benckiser saw turnover in Latin America, Asia Pacific, Australasia and China rise 10% in January-September. These labels also helped to deliver 7% growth in otherwise-stagnant Western consumer markets during the period — the firm’s Mucinex chest congestion product and Lysol disinfectant line were mainly responsible for growth in North America during July-September, for example.
Many commentators believe that recent share price strength has worsened Reckitt Benckiser’s already bloated valuation and thus investment appeal. The business was recently dealing on a forward P/E multiple of 18.1, comfortably surpassing a corresponding readout of 15.3 for the complete household goods and home construction sector.
Still, I believe that the company is a great pick for those seeking the security of dependable and chunky earnings growth year after year — indeed, earnings per share have grown at a compound annual growth rate of 10.7% over the past five years. Reckitt Benckiser’s heavyweight Powerbrands have the ability to not only deliver strong revenues growth, but also maintain its encouraging margin story, a critical earnings safety net in the event of a fresh macroeconomic slowdown.
