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Reckitt Shares Rise on Baby Formula Lawsuit Victory and JPMorgan Upgrade
Shares in Reckitt Benckiser Group (LSE: RKT) rose more than 4% on Tuesday, lifted by a significant legal victory for its Mead Johnson baby formula business and a subsequent stock upgrade from analysts at JPMorgan.
Favorable Verdict in Bellwether Case
Reckitt announced on Monday that a U.S. federal jury had sided with its Mead Johnson unit in a closely watched lawsuit. The unanimous verdict, delivered in the U.S. District Court for the Northern District of Illinois, concerned allegations that its Enfamil preterm baby formula caused necrotizing enterocolitis (NEC), a serious intestinal disease.
The company noted this was the first bellwether case to be tried in the federal multidistrict litigation against Mead Johnson. Following the decision, Reckitt stated that there are currently "no outstanding jury verdicts in the overall NEC litigation against Mead Johnson," providing a major boost to investor sentiment by alleviating some of the legal uncertainty that has weighed on the stock.
JPMorgan Upgrades on Reduced Overhang
Citing the improved legal outlook, JPMorgan upgraded Reckitt's stock to Overweight from Neutral. The bank also raised its December 2027 price target on the shares to 6,500 pence from a previous 5,800 pence.
AdIn a note to clients, analyst Celine Pannuti said that removing the litigation overhang "should allow the market to refocus on the core valuation." The bank highlighted that a recent partial settlement by competitor Abbott in similar cases makes a potential resolution for Reckitt seem "closer than feared." JPMorgan estimates that if the NEC liability were resolved, Reckitt’s core business would trade at an attractive valuation relative to its European peers.
Focus on Core Operations
The upgrade also reflects confidence in Reckitt's underlying business performance. JPMorgan noted that core like-for-like sales growth returned to the 4%-5% range in the second quarter, which it described as being at the top end of performance among European staples companies.
The bank raised its core growth forecasts for Reckitt to 4.0% for 2026 and 5.0% for 2027. This optimism is based on continued growth in emerging markets and an expected re-acceleration in the U.S. market, driven by innovation for key brands like Lysol and Mucinex.
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