Credit Suisse raises target price on Reckitt Benckiser

Analysts at Credit Suisse judged Reckitt Benckiser's acquisition of Mead Johnson to be well-timed, allowing it to make the most of cheap debt which meant the transaction would be immediately earnings accretive.

As a result, they boosted their earnings per shares estimates for the company over 2017 to 2019 by between 4% and 11%, which in turn led them to mark up their target price for the stock by 11% to 8,650p.

In particular, they pointed out how in the absence of that acquisition it would have been impossible for it to achieve its target for growth of 10% in earnings per share organically.

That was important given how its top management's key performance indicator was EPS growth, analyst Charlie Mills highlighted.

From a product standpoint, infant milk formula was an attractive category offering growth, strong branding and premiumisation, they added.

On the other hand, the analysts conceded that Reckitt had suffered from multiple headwinds including a changing regulatory and distribution backdrop in the People's Republic of China and a slowdown in Latin America.

Be that as it may, "it looks to us that Reckitt has timed its purchase very well," they said.

The opportunities offered by the purchase of Mead Johnson and better underlying trading in the second half should help Reckitt outperform, Credit Suisse said.

Mills raised his target price on the shares from 7,849p to 8,650p and reiterated his 'outperform' recommendation.