Reckitt Benckiser ascends to Citi's European focus list, replacing Danone, with the bank seeing the consumer health company receiving revenue upgrades and continuing its recent run of outperformance.
Reckitt is seen as fitting in with Citi's strategy themes of 'defensive growth', as well as being a world champion in its sector.
"At Reckitt, we think the market underestimates the upside potential from the company's gradual transformation into a Consumer Health-led Home and Personal Care company, which we see driving margin-accretive revenue upgrades," analysts at Citi write in a note.
"In addition, the organic potential of its portfolio largely recently acquired Consumer Health assets, we expect further acquisitions in this space to accelerate the process."
Reckitt Benckiser has a price momentum of 93 out of 100, according to Thomson Reuters StarMine data, but trades at a Price/EPS discount to peers Beiersdorf, Unilever and L'Oreal.
Although Danone is not seen as keeping up with Reckitt's outperformance in the near term, it is retained as a 'buy'.
Meanwhile Citi upgrades the world's biggest food group Nestle to "buy" and raises its raiting on the maker of Nivea face creams Beiersdorf to "buy" too, saying improved margins can join top-line recovery to drive earnings upgrades.
The Citi Focus List Europe is a compilation of Citi's European analysts' top 15-20 'buy' ideas for the next 12 months.
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