What’s Telling Me to Buy Reckitt Benckiser plc Today

Today I am looking at Reckitt Benckiser (LSE: RB) (NASDAQOTH: RBGLY.US) and deciding whether to pick the household goods giant up off the shelf.

Positive half-yearly report confirms operational uptrend

Reckitt Benckiser announced last month that adjusted operating profits edged 3% higher in the first half of the year, to £1.16bn. This was driven by a meaty 7% increase in net revenues, to £4.99bn. Encouragingly, like-for-like sales rose 5% from the corresponding 2012 period.

The firm also reported a hefty 230 basis point improvement in gross margins, to 58.7%. Reckitt Benckiser boasts excellent strength through its self-proclaimed ‘Powerbrands’ such as Dettol, Vanish and Cillit Bang, which allowed it to hike prices during the period. A better product mix, combined with an ambitious cost-cutting plan, also helped to drive margins.

On top of this, the company also reported that “emerging markets continued to perform strongly despite some slowing in the growth of their economies” during January to June. And Reckitt Benckiser has specifically targeted 16 ‘Powermarkets’ to underpin future growth, and is spending large on brand improvements to improve demand in these regions. China now represents the largest single market for its Durex contraceptive brand, for example.

A solid, if unspectacular, investment case

City analysts expect earnings per share to edge marginally higher in 2013, to 267.9p from 267.6p last year, before accelerating modestly in 2014 to 277p.

The shares currently change hands on a P/E rating of 16.9 and16.4 for 2013 and 2014 respectively, above a prospective reading of 15.8 for the household goods and home construction sector, as well as a readout of 16.1 for the FTSE 100.

As well, Reckitt Benckiser carries a dividend yield of 3% for the current year, modestly below a reading of 3.2% for the UK’s largest companies although larger than the 2.7% for its industry rivals.

Clean up with the Fool

On the face of it, Reckitt Benckiser does not offer particularly juicy pickings for the near-to-medium term. But if you are seeking a dependable, defensive earnings generator with the potential to experience igniting developing-market revenues over the long haul, then there are worse picks out there than the household goods specialist.

But if the firm fails to whet your appetite, no matter because there are plenty of other attractive FTSE 100 winners to pick from. If you are looking to dig out such big-cap bangers, I strongly recommend you check out these recommendations from veteran fund manager Neil Woodford.

Woodford — in charge of UK Equities at Invesco Perpetual — has more than 30 years’ experience in the industry, and boasts an exceptional track record when it comes to selecting stock market stars.

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> Royston does not own shares in Reckitt Benckiser.