Today there was a small setback in the stock markets. The trigger was decreasing hopes of a quick interest rate cut in the US.

The inflation rate in the US has only fallen from 3.4 to 3.1%. Many analysts and investors had hoped for a faster drop below the 3% mark. In that case, the US Federal Reserve would have slowly been under pressure. However, this allows the Fed to continue waiting on the sidelines and take its time with the first interest rate cut. On the other hand, it is positive that the inflation trend continues to show a downward trend. This gives hope for the rest of the year.

A brief review: In 2022, when inflation rates rose significantly worldwide, stocks of consumer goods manufacturers with strong brands were in demand because they could quickly and noticeably increase their prices and resist inflation. However, the stock of British consumer goods manufacturer Reckitt Benckiser was unable to benefit from this.

It has been moving sideways for some time, but this makes it even more interesting as it is currently being traded at a significant discount compared to its US competitors. According to my analysis, this discount is too large.

The beginnings of Reckitt Benckiser First, let’s talk about the company and its business model: Reckitt Benckiser was formed in December 1999 from the merger of the British company Reckitt & Colman with the Dutch company Benckiser NV. The main shareholder of Reckitt Benckiser was the German Reimann family for a long time.

The origin of the Reimann family’s stake in Reckitt Benckiser is as follows: In 1851, chemist Karl Ludwig Reimann founded a chemical factory in Ludwigshafen together with Johann Adam Benckiser. This later became the company Benckiser, which later merged with Reckitt & Colman.

Global market leader in household cleaners The resulting British conglomerate Reckitt Benckiser is now the global market leader in household cleaners and a leading manufacturer of laundry, cleaning, and sanitation products that you may know under brands such as Calgon, Sagrotan, or Vanish. This makes Reckitt active in the non-cyclical basic consumer goods sector.

This means that customers continue to buy these products even in more difficult economic times, as they are considered essential items. Therefore, the business continues to thrive even in times of high inflation or weaker economic conditions, as shown by the latest figures.

Strong numbers and a positive outlook Reckitt Benckiser was able to increase its revenue in the first nine months of the past fiscal year (newer figures are not yet available) by 4% to nearly 11.05 billion British pounds (GBP).

In the most recent quarter, Reckitt was also able to increase its revenue on a comparable basis. Here, there was an increase of 3.4% to 3.6 billion GBP. The health and hygiene sectors, in particular, saw positive development.

For the full year 2023, a 3-5% increase in adjusted revenue is expected, with an adjusted operating profit margin slightly above that of the previous year.

Share buybacks and a new CEO In late October of last year, Reckitt launched a billion-pound share buyback program. The company plans to repurchase its own shares worth up to 1 billion GBP by the end of October this year. This increases the shareholders‘ stake in the company without them having to buy more shares. As a result, future profits and dividends will have to be distributed among fewer shares.

The new Reckitt CEO, Kris Licht, who took over the CEO seat on October 1, 2023, and previously led the successful health products business, could also bring new momentum.