On 14 August I looked at former FTSE 100 darling Reckitt (LSE: RKT) and cruelly declared I wouldn’t touch it with a bargepole.

I’ve been monitoring the consumer goods giant for years, because it has much to recommend it. Its brands are a rollcall of hygiene, health and nutrition household names including Air Wick, Calgon, Cillit Bang, Finish, Harpic, Nurofen, Vanish and many more.

Reckitt may be based in humble Slough but it sells its products in nearly every country in the world. Investors saw it as a solid defensive stock, with a reliable dividend and growth potential in the good times. Then its share price crashed by a third in just two years.

The share price has taken a beating

The reason? Legal issues in the US, a perennial problem for UK multinationals.

Reckitt’s ill-fated $16.6bn takeover of US-listed baby milk formula maker Mead Johnson Nutrition in 2017 lay at the heart of it. The board didn’t just overpay but acquired a legacy of legal claims, particularly over its Enfamil formula. 

In March, a court in Illinois awarded $60m in damages to a woman whose premature baby died after consuming Enfamil. This knocked £5.4bn off Reckitt’s share price in a day.

More than 1,000 similar claims have been in filed in US courts targeting both Reckitt and rival Abbott Laboratories. So when Abbott was forced to pay a total of $495m in July, after a US jury found its infant formula had caused a girl to develop a dangerous bowel disease, Reckitt fell too.

Bloomberg Intelligence estimated the firms faced a combined $2.5bn in liability exposure. Both companies argued the claims were flawed and not based on scientific evidence, but that’s down to the courts.

As if that wasn’t enough, a tornado hit production at Reckitt’s Mount Vernon facility in the US, and management uncovered accounting issues in the Middle East.

So even with the Reckitt share price at just 12.97 times earnings and yielding more than 4.5% in August, I didn’t want to know.

But finally, finally… some good news. Yesterday (October 31), a state court in St Louis, Missouri, rejected a case claiming that Mead Johnson and Abbott formulas caused serious inflammation of the bowel.

The shares look decent value

Reckitt’s shares jumped more than 10% in early trading today. They’re still down 14.87% over 12 months and look tempting at 14.45 times earnings and yielding 3.79%.

But you know what? I’m still not going to buy them.

Yes, the legal win was a positive but there are plenty more cases in the pipeline. And yes, production has recovered from the US tornado, plus Reckitt’s hygiene and health divisions are moving along nicely.

But sales aren’t exactly booming. Reported group net revenue is down 3.8% year-to-date, mostly due to adverse currency shifts and a small net impact from mergers and acquisitions.

Even if Reckitt was flying on every front, I still wouldn’t touch it until the legal shadow has lifted. I’m keeping my bargepole handy.