Key Takeaways
- Ongoing litigation concerning Reckitt subsidiary Mead Johnson has weighed on investor sentiment, as have investments in Russia.
- The firm is offloading 25% of its product portfolio as part of a strategic reset.
- Analysts say the company’s “power brands,” including Nurofen, Gaviscon, and Strepsils, will help sales, especially in emerging markets.
Shares in consumer health company Reckitt Benckiser RKT, which distributes household and consumer health brands such as Lysol and Mucinex, are down more than 10% so far in 2026, positioning the stock for its worst year since 2018.
Investor concerns include rising cost inflation due to the Iran war, a mild cold and flu season, and ongoing litigation over a 2017 acquisition. Reckitt has only just managed to extricate itself from Russia, selling its hygiene business in the sanctions-hit country. These issues have compounded, giving the impression that the company is “disproportionately accident-prone,” according to one analyst.
But analysts believe that positive first-half earnings could be the start of a recovery, with Reckitt’s emerging-markets exposure boosting its long-term prospects. The wide-moat company’s “power brands”—including Nurofen, Gaviscon, and Strepsils—could also provide higher growth than rivals in the sector, says one Gold-rated fund manager.
Why Has Reckitt Fallen Out of Favor?
Shares in Reckitt are off over 10% over five years, compared with a nearly 80% rise in the Morningstar UK Index in sterling terms. Some analysts trace the company’s problems to 2017, when it bought baby formula maker Mead Johnson for USD 16.6 billion. Lower global birth rates have scaled back demand for infant formula, while US litigation over the product’s health impact is ongoing and could cost the company millions of dollars. Changes to the sanctions regime against Russia added further problems in the first quarter of 2026, before Reckitt announced the sale of its Russian hygiene business in July.
“Reckitt was developing a reputation as a reliable compounder, but the combination of ongoing litigation related to Mead Johnson and recent tribulations with respect to Russian sanctions jeopardizes this,” says RBC Capital Markets analyst James Edwardes Jones. “The emergence of unanticipated problems in [Reckitt’s Russian business] in Q1 revived the perception of Reckitt as being disproportionately accident-prone.” He says the exit from Russia is a positive for the shares, but that the venture is likely to “cast a shadow” over the rest of the year, at least in terms of sentiment.
Reckitt’s Strategic Reset Could Revive Its Stock
Under Kris Licht, who became CEO in 2023, Reckitt is disposing of around 25% of its brand portfolio. The Essential Home brands were sold last year to a private equity firm, and the company is exploring options to sell Mead Johnson. That exit “will likely happen once more clarity on US litigation is reached in coming months,” says Hugh Yarrow, portfolio manager on the Gold-rated Evenlode Income Fund.
Yarrow thinks a successful exit of Mead Johnson could lead to a material re-rating in Reckitt stock, but that at current valuations, it could even be a target for acquirers amid the wave of FTSE 100 takeovers. “Ultimately, if the public market failed to recognize the strategic value of Reckitt’s health and hygiene portfolio, a strategic buyer could step in,” he says.
However, in its latest earnings report, strength in emerging markets led the hygiene products maker to beat expectations, pushing its shares up 5% on the day. Cleaning and hygiene products drove like-for-like sales growth up to 4.7% in the second quarter from 0.6% in the first. “Second-quarter results showed top-line acceleration and bottom-line resilience, which should support a gradual shift in sentiment,” says Morningstar analyst Diana Radu.
IG chief market analyst Chris Beauchamp says the latest results could convince the market the company is in turnaround territory: “These are the kind of numbers to help drive an ongoing recovery in Reckitt’s shares, and now it’s up to the business to deliver further growth in the second half, with the improvement in margins pointing toward progress being made in that direction.”
Key Morningstar Metrics for Reckitt Benckiser
- Fair Value Estimate: £68.00
- Morningstar Rating: ★★★★
- Economic Moat: Wide
- Morningstar Uncertainty Rating: Medium
Morningstar assigns a wide economic moat to Reckitt because of its 11 market-leading brands in consumer health and hygiene. “These 11 ‘power brands’ are all number one in their categories, and they’ve grown globally at about 5% over the long term,” says Evenlode’s Yarrow. “Their growth prospects look similarly attractive, with management guiding to 4%-5% growth over the medium term.”
Why Emerging Markets Could Boost Reckitt Stock
Reckitt’s emerging-market exposure of 40% of sales could also improve the stock’s prospects over the longer term. Morningstar’s Radu describes emerging markets as “a durable growth engine” for the firm.
“The runway in emerging markets is compelling,” says Evenlode’s Yarrow. “As incomes in emerging markets increase, Reckitt is delivering more than 5% growth in more mature areas of its emerging market portfolio.” He adds that there are still opportunities to increase sales of products like dishwashing tablets, sore throat tablets, and vitamins.
