Does Reckitt Benckiser Group Plc Have Greater Investment Appeal Than Diageo plc, Imperial Brands PLC, Procter & Gamble Co And Unilever plc After Today’s Results?

Are shares in Reckitt Benckiser Group Plc (LON:RB) (LSE:RB.L) more appealing than those of Diageo plc (LON:DGE) (LSE:DGE.L), Imperial Brands PLC (LON:IMB) (LSE:IMB.L), Procter & Gamble Co (NYSE:PG) and Unilever plc (LON:ULVR) (LSE:ULVR.L)?

Reckitt Benckiser Group Plc
Reckitt Benckiser Group Plc

Reckitt Benckiser Group Plc (LON:RB) (LSE:RB.L) has released results for FY2016 to the stock market today. LFL net revenue grew 3%, with total net revenue at actual rates of 11%. This was down to the net positive impact of forex and M&A.

Health & Hygiene led growth with LFL sales 4% higher. This reflected a broad-based growth across the company’s portfolio, which was partially offset by weakness in Scholl sales. Gross margins increased 180 basis points to 60.9%. This was driven by mix, cost optimisation tailwinds and some commodity cost tailwinds.

Overall, 2016 was a good year for Reckitt Benckiser, since it faced difficult markets and an unusual number of issues. It registered slower growth in developed markets and across a number of emerging economies. Russia and the USA in particular were tough, while strong performances in India, China, Indonesia and Thailand helped offset this.

Reckitt Benckiser has also agreed to acquire Mead Johnson for $90 per share in cash. This values Mead Johnson’s equity at $16.6 billion. This will bring significant R&D, quality, regulatory and specialist distribution capabilities to Reckitt Benckiser, according to today’s update.

In the last year, shares in Reckitt Benckiser have outperformed those of consumer peers Imperial Brands PLC (LON:IMB) (LSE:IMB.L), Procter & Gamble Co (NYSE:PG) and Unilever plc (LON:ULVR) (LSE:ULVR.L). Reckitt Benckiser is up 20%, while Imperial Brands is up 8%, Procter & Gamble’s share price is 9% higher and Unilever has gained 13%. However, Diageo plc (LON:DGE) (LSE:DGE.L) is up 26% during the same time period.

In my view, Reckitt Benckiser faces a tough outlook and says in today’s update it expects macro conditions to remain challenging. However, I’d argue the same thing could be said for Procter & Gamble and Unilever, since they operate in similar product categories and regions to Reckitt Benckiser. I feel Diageo and Imperial Brands may have a more stable outlooks, combined with above-average EPS growth prospects.

Therefore, while they are my 2 top stocks from the sector, I think Reckitt Benckiser still has investment appeal. Today’s update shows it has the right strategy in my view, which along with the acquisition of Mead Johnson should stand its shares in good stead in the long run.

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