Europe Markets: Reckitt stock stumbles on revenue miss and margin concerns

Not even the start of a £1 billion ($1.21 billion) buyback program could save shares of Reckitt
RKT,
-4.02%

on Wednesday, as they dropped nearly 7% after the consumer goods group missed revenue expectations.

The London-listed company, whose brands include Nurofen, Dettol and Durex, said third quarter like-for-like net sales rose 3.4%, lower than the company-provided analyst consensus of 3.7% growth, after a poor showing from the nutrition division.

“We are firmly on track to deliver our full year targets, despite some tough prior year comparatives that we continue to face in our U.S. nutrition business and across our [over-the-counter] portfolio in the fourth quarter,” said chief executive Kris Licht, who took the helm at the start of October.

Analysts welcomed news that Licht was immediately launching a share repurchase program, but expressed concerns that margins may slip.

“A £1 billion share buy-back grabs the headlines, but it may be the group’s retreat from a target of mid-20’s % operating margins that drives the shares today,” said Steve Clayton, head of equity funds, Hargreaves Lansdown. “CEO Licht sees solid underlying demand growth across the portfolio, but a need to sharpen execution in some areas.”

The share price drop on Wednesday left Reckitt down about 3% for 2023, against a 0.8% fall over that period for the U.K.’s FTSE 100
UK:UKX,
which by lunchtime in London was flat on the session. Frankfurt’s DAX
DX:DAX
lost 0.1% and the CAC 40
FR:PX1
in Paris shed 0.2% as European investors had a slew of earnings and trading updates to absorb.

One notable strong performer was Deutsche Bank
DBK,
+8.18%
,
whose shares rose nearly 7% after the German financier said it plans to profit on increased volatility in global markets, and boost shareholder returns using an extra €3 billion ($3.173 billion) worth of capital it expects to free up by 2025. 

DB’s U.K. peer Lloyds Banking
LLOY,
+2.18%

reassured investors after posting results, its shares adding 2%. “After Barclays’ third quarter numbers spooked investors in bank shares yesterday, Lloyds delivered a more reassuring update with, crucially, and unlike its rival, no downgrade to full-year expectations for the key net interest margin metric,” said Danni Hewson, head of financial analysis at AJ Bell.

Also on the front foot was Dassault Systemes
DSY,
+7.98%
,
its shares adding 9% after the French software maker posted revenue and operating profit ahead of analysts’ expectations for the third quarter.

Shares in France-based Kering
KER,
-3.47%
,
the luxury goods group, fell 3% after revealing a 13% decline in revenues during the third quarter after sales at its two biggest brands, Gucci and Saint Laurent, fell 14% and 16%, respectively.

And it was a terrible day for Worldline
WLN,
-59.24%
,
whose shares slumped 58% after the Paris-listed payments company sharply cut its guidance, blaming a deteriorating environment in Germany.

The German 10-year bund yield
BX:TMBMKDE-10Y
rose 3.2 basis points to 2.858% after a report showed business sentiment in Europe’s biggest economy improved in October, snapping five consecutive months of declines. The European Central Bank is expected to leave its deposit rate at 4% after its policy meeting on Thursday.

Read: ECB seen pausing as economy sputters

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