Haleon (LSE:HLN) shares trade at a 2% premium versus their launch price just over a year ago. The shares have displayed some volatility, but only little more than the market in general.
On 2 August, Haleon will report on its earnings for the first half of the year. So what can we expect? And what does the future hold for the world’s largest consumer healthcare company? Let’s explore.
H1 forecast
Analysts are anticipating robust growth from Haleon in the first half, with revenue projected to increase 8.2% to reach £5,687m. This growth is primarily driven by strong performances in the EMEA and Asia Pacific regions, expected to grow at rates of 10.4% and 10% respectively. Meanwhile, the North American market is predicted to grow more modestly at 4.6%.
Consequently, the company is poised to achieve a net profit of £797m for the half, along with an adjusted EBITDA of £1,316m, a slight improvement from £1,306m last year. Analysts are also expecting EPS to rise to 8.63p, a notable increase from 4.2p recorded in the first quarter.
While the projected EBITDA growth may not be overly exciting, it is still encouraging to witness any form of growth in the current economic climate, characterised by high inflation and, in certain regions, a cost-of-living crisis.
This more moderate EBITDA growth could also be influenced by the appreciation of the pound. As Haleon operates with a strong global presence in over 100 countries, the majority of its earnings are denominated in various currencies, making it susceptible to currency fluctuations, which can have a significant impact on financial performance.
It’s going to get better?
The consensus among analysts is that Haleon is expected to achieve stable medium-term growth. Investors should look upon this positively. EBITDA is projected to reach £2,868m in 2023, followed by increases to £3,020m in 2024 and £3,192m in 2025. This growth will be driven by revenue expansion in the Asia-Pacific market, particularly in areas like vitamin and mineral supplements (VMS). EPS for 2023 is anticipated to be 17.98p.
One of the key long-term drivers for Haleon is the strength of its brands. With a growing middle-class globally, the demand for branded products is likely to increase. Branded products are often associated with higher quality, luxury, and a desired lifestyle, making them a symbol of social status and success. This is especially the case in developing economies.
However, there are potential downsides to consider. The consumer healthcare market is expected to face increased competition. In turn, this may exert pressure on margins in the long run. Despite this challenge, Haleon holds a competitive advantage in the sector, which bodes well for its prospects.
Valuation
Haleon shares trade at 17 times earnings, and 18 times earnings on a forward price-to-earnings basis. Given the forecast growth in EPS over the coming years to 21.18 in 2025, this could be seen as an undervaluation. It’s a stock I’m looking to top up on.
