...because I consider it to be an expensive defensive. The stock concerned in Reckitt Benckiser who announced full year results today. Yes it is a good quality company with brands and high margins and return on capital as a result.
Their revenues were down in actual currencies to £8836m versus forecasts of £9200m to £9500m so a miss although the company did flag a 4% growth in constant currencies and they expect a similar rate of growth this year. This appears to be a slow down from the historic 8% trend.
In addition the adjusted eps figure of around 230 pence seems to be a big miss against the forecasts of anywhere between 245 pence and 260 pence, although I acknowledge that the picture was confused by the demerger of RBP. Tends to suggest that either their guidance wasn't very good or the analysts couldn't work out the effects of the demerger or it was a genuine disappointment, not sure which. The fact that analysts had on average forecast a dividend cut but they gave a 1% increase suggest perhaps the first two reasons? Even before this thought the estimate revisions were very negative.
So I am surprised to see the shares spiking up first thing above 5800 pence (+4% or so) on the back of these numbers, but maybe I'm missing something in all their polished presentation of the figures. I note also that they are still doing share buybacks and broadly neutralizes incentive plan share issuance (c. £300m p.a.) and intend to top this up with an additional up to £500m share buyback programme in 2015.
The balance sheet is fine with just £1.5 billion of debt versus the £40bn market cap. so I guess they could have fire power to do another deal, which is just as well as they seem to be running out of steam on their own having struggled to grow earnings since 2010 according to figures presented by Stockopedia. Thus with this background I can't get excited about this one on 22x and a 2.5% yield with an earnings yield of around 5 to 6% so it is not one that wows me up here and if I had it I'd say sell it bang - given the rating and the disappointing growth, but I can see others might want to hold it as a quality play.
Talking of ratings, check back tomorrow as I'm planning a post in response to some readers questions about rating ranges and sell disciplines so see you then.