Having said that, there are a handful of Footsie shares that I’m keen to avoid. Here are two of them.

WPP

Let’s start with the worst-performing FTSE 100 stock this year (by some distance). That’s WPP (LSE:WPP), which is down 56.2%.

Since February 2017, the stock has lost a whopping 80% of its market value!

Indeed, if it carries on falling, it may even be relegated to the FTSE 250. That would be some fall from grace for what used to be the world’s largest advertising group.

The company is suffering from weak client spending and the loss of some high-profile contracts. Major restructuring efforts are weighing on profitability, with H1 operating profit falling 48% to £221m. The interim dividend was also cut by 50%.

However, there’s a new CEO, and she might be able to forge a path forward. In its interim results, the firm namedropped the likes of Electronic Arts, Hisense, L’Oréal, Samsung, IKEA, and Heineken. These are blue-chip heavyweights, and WPP has deep experience working with such names.

And while we have no real clue about near-term profits, the stock looks dirt cheap at just 5.5 times this year’s forecast earnings. So, I can see why some hedge funds have been scooping up this FTSE 100 stock in recent months.

All that said, AI will probably automate or accelerate more tasks that WPP previously charged for, such as basic creative production. Over time, this might put intense downward pressure on client fees. 

In this scenario, a reduction in client spending might become structural rather than cyclical. And that would be a big challenge.

Perhaps I’m overstating this AI risk. And maybe the firm’s AI-powered WPP Open platform stands to benefit from the proliferation of cheap AI tools. But due to this uncertainty in my mind, I’m not keen to invest.

Haleon

The second stock is Haleon (LSE:HLN), the consumer healthcare company that was spun off from GSK in July 2022.

The share price is down 16% in the past year, but broadly flat since listing.

Now, there’s not much threat to the business model here. Haleon owns many well-known brands like Sensodyne, Panadol, and Advil. AI might disrupt many things, but not toothpaste or painkillers.

Meanwhile, the earnings outlook appears promising. Next year, earnings per share are forecast to jump nearly 10%, along with the dividend (around 12%). So this is much more of a steady-Eddy, defensive stock.

My problem here is that the dividend yield is just 2%. Based on forecasts for 2026, this only rises to 2.6%. I would want more income from this type of share, given the moderate level of growth expected from the mature industry in which Haleon operates.

Again, I think the stock could add defensive qualities to a portfolio. However, with a couple of decades left till retirement, I’d rather go on the offensive with the shares I buy.

The post 2 FTSE 100 shares I’m steering clear of in today’s market appeared first on The Motley Fool UK.

So would an investment in Haleon have been successful? Well, the stock’s actually down 8% over the past 12 months. As such, £10,000 invested then would be worth £9,200 today. That’s not great, but around £180 in the form of dividends would have cushioned the blow ever so slightly.

What’s behind the drop?

Haleon shares have struggled over the past 12 months as investors reassessed growth expectations in consumer healthcare. The stock was pressured by concerns around slowing demand in key categories, especially in North America, where its respiratory portfolio faced a softer consumer environment after strong post-pandemic comparisons.

Questions over the company’s ability to consistently deliver top-line growth while managing cost inflation and foreign exchange headwinds also weighed on sentiment. At the same time, Haleon’s relatively high debt load from the GSK spin-off left the market cautious, particularly in a higher rate environment.

Its latest half-year results highlighted both sides of the story. Profitability looked strong, with margins expanding on the back of supply chain efficiencies and productivity gains, while oral health delivered robust growth.

However, management cut its organic revenue growth guidance for FY25 to around 3.5% (down from 4-6%). This reflects some weakness in North America. That trade-off between margin resilience and top-line momentum has remained central to the stock’s performance.

Not obviously undervalued

Haleon’s valuation reflects the market’s view of it as a steady, brand-driven cash generator rather than a high-growth story. The stock trades on a forward price-to-earnings (P/E) that steps down from 20.7 times in 2025 to 17.3 times by 2027. That’s broadly in line with consumer staples peers and suggesting earnings growth should gradually bring the multiple down.

At the same time, the company’s strong free cash flow generation supports both deleveraging and dividend growth. Dividends are growing steadily, with the payout ratio settling around 40%. That translates into a prospective yield moving from 1.9% in 2025 to around 2.4% by 2027.

While this yield’s modest, some investors will be reassured to know that these payments are backed by resilient earnings from household brands such as Sensodyne and Panadol.

Net debt‘s projected to fall from £9.9bn in 2022 to £6.4bn by 2027. That’s going to ease concerns about balance sheet leverage left over from the spin-off from GSK. Clearly, as debt’s falling, the balance sheet seems manageable, but it will still be a drag on earnings.

The bottom line

Analysts remain fairly positive on Haleon, with consensus at Outperform and an average target price of 413.6p — about 15% above the current share price. Personally, I don’t believe the stock’s clearly undervalued, but appreciate there’s a lot of value within the Haleon portfolio and the stock’s valuation isn’t overly demanding. As such, I do believe it’s worth considering.

The post £10,000 invested in Haleon shares 1 year ago is now worth… appeared first on The Motley Fool UK.

The country’s Gross Domestic Product has fallen for two consecutive quarters, the 10-year gilt rate is higher than after Liz Truss’ mini budget and the Office for Budget Responsibility recently described the public finances as being in a “relatively vulnerable position”.

What’s going on?

Some of this apparent contradiction can be explained by the fact that the UK’s largest listed companies have a global presence. It’s estimated that 75-80% of their revenues are earned overseas, which makes them less reliant on the domestic economy. And with 20% generated in America, a strong dollar can also boost earnings.

It could also be explained by investors taking a longer-term view. In these circumstances, short-term problems don’t matter as much. If you think the economy’s going to grow next year (and the year after) and that a series of base rate cuts by the Bank of England will help bring the cost of government borrowing down, then you are likely to have a more optimistic outlook than someone who closely follows the news every day.

A global business

Whatever the explanation, the FTSE 100’s increased by around 10% since July 2024. This is approximately the same amount by which the share price of Haleon (LSE:HLN), the consumer healthcare group, has gone up. And there could be more to come.

Of the 18 brokers covering the stock, 11 consider it a Buy. Only one is advising their clients to Sell. Their average 12-month share price target’s 430p. That’s a near-20% premium to today’s (17 July) price.

However, around one third of its revenue comes from the US. For many years, President Trump has threatened to legislate to make drugs companies cut their prices. If he carries this through, Haleon could be vulnerable.

To make matters worse, the group could also face higher import tariffs on any products imported into the country. No wonder the company describes current trading conditions as “challenging and uncertain”.

But surprisingly for a stock facing these issues, Morgan Stanley recently described it as an “attractive defensive play”. It claims its strong brands offer some protection during periods of economic uncertainty.

However, income investors will probably look elsewhere. Since being spun out of GSK in 2022, it’s increased its dividend every year. But its current yield’s a miserly 1.8%.

The best of British?

But I think Haleon’s the sort of stock that shows what’s best about the FTSE 100. It’s a group valued at £32bn with a truly global footprint. It sells into 170 countries and generated £11.2bn of revenue in 2024. Of this, only £384m was earned in the UK. Therefore, it isn’t reliant on a fragile UK economy.

Many of its brands – including Sensodyne, Centrum and Panadol – are recognised all over the world. Indeed, in the consumer healthcare market, it’s the global leader in five categories.

As a result of its success, the group provides employment to nearly 25,000 people. In 2024, it returned £1bn to shareholders by way of dividends and share buybacks. And it’s expected to grow its earnings per share by nearly 18% over the next two years.

For these reasons, I think it’s a long-term growth stock for investors to consider.

The post Is the FTSE 100 becoming increasingly disconnected from the UK economy? appeared first on The Motley Fool UK.

With 2025 shaping up to be a volatile year for markets, investors may benefit from taking a cautious approach. Typically, this means avoiding high-risk and speculative assets in nascent industries like artificial intelligence (AI).

While the promise of high rewards is hard to ignore, history has shown that the excitement around such industries can quickly turn sour. With that in mind, I’ve identified two companies worth considering for more stable returns in 2025 and beyond.

BAE Systems

BAE System (LSE: BA.) is a leading UK-based aerospace and security company and the largest defence contractor in Europe. It designs and manufactures advanced technology-led solutions for companies the world over. It was formed 25 years ago as a merger between British Aerospace and an electronics subsidiary of General Electric. In that time, it’s grown to employ almost 100,000 people in more than 40 countries globally.

As a contractor it relies on government budgets, particularly US defence spending. This puts it at risk of short-term losses from policy decisions outside its control. More so, it if fails to innovate at the same rate as competitors, it risks losing contracts to other suppliers.

Revenue dipped slightly in 2018 but has been steadily increasing at a rate of 6.46% since, from £16.82bn to £23bn in 2023. Earnings have almost doubled in the same period, up from £1bn in 2018 to £1.86bn in 2023. Analysts are generally favourable about the stock’s prospects, with the average 12-month price target eyeing a 21.8% increase.

I already hold stock in the company and I think investors aiming for long-term growth could benefit from considering it.

Haleon

Haleon (LSE: HLN) was spun off from GSK in 2022 to allow the drugmaker to focus on pharmaceuticals. It’s now one of the largest consumer healthcare companies in the world, with listings on both the FTSE 100 and on New York Stock Exchange (NYSE).

Most people will know it by its popular brands such as Sensodyne, Panadol and Centrum. Since listing in 2022, its share price has climbed a decent 20%. 

But it faces stiff competition from multinational healthcare leaders including Colgate-Palmolive, Reckitt Benckiser and Unilever. It also risks losses if consumers opt for lower-cost alternatives, evidenced by a drop in demand for Panadol in late 2024.

The business already holds a lot of debt (£9.46bn) so it must remain competitive or risk defaulting on interest payments. It’s already taken steps to address these issues by selling off non-core brands and streamlining its portfolio. This could help it boost its core products and offer more competitive pricing.

Analysts forecast earnings to grow at a rate of 7.85% going forward, rising from 17p per share to 23p in 2027. Revenue’s expected to grow moderately slower, from £11.3bn to £12.68bn.

While Haleon doesn’t offer the same growth potential as BAE, it’s a more defensive stock. That adds stability to a portfolio as the company typically remains in high demand year-round. I’m yet to invest in the stock as I already hold shares in Reckitt and GSK. However, I think it’s a good long-term investment to consider and one I’ll be keeping an eye on this year.

The post Looking for FTSE shares to buy? Here are 2 to consider for long-term gains appeared first on The Motley Fool UK.

Our monthly Fire Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of growth-focused Fire recommendations, to help Fools build out their portfolios.

• Since being spun off from GSK, Haleon has performed about as well as anyone could have hoped.
• The consumer health group has been growing sales at a steady clip thanks to full control over R&D and marketing budgets, reducing leverage thanks to increased cash flow, and conducting M&A to rid itself of lower growth brands and bulk up in attractive areas.
• If Haleon can continue growing sales from its ‘Power Brands’ like Sensodyne, Advil, and Theraflu at 5%+ rates then achieving the medium-term target of consistent 4%-6% organic growth is very achievable. Pair that with ongoing margin improvements and reduction in interest payments and you have a recipe for a group that’ll have plenty of cash to either spend on M&A or return to shareholders through its dividend and share repurchase programmes.
• Those financial considerations and the defensive nature of the consumer health market means we think Haleon is worth considering in January at its current valuation of circa 20 times forward earnings.

The post Just released: the 3 best growth-focused stocks to consider buying in January [PREMIUM PICKS] appeared first on The Motley Fool UK.

I’m looking for a bit more healthcare exposure right now as I like the sector from a risk/reward perspective. Could Haleon – which owns well-known consumer healthcare brands such as Sensodyne, Panadol, and Voltaren – be a good stock to buy for my portfolio? Let’s discuss.

Performing well

Haleon’s recent half-year results were decent. For the six-month period to the end of June, the company saw:

• Organic revenue growth of 3.5%
• ‘Power Brands’ organic growth of 5.6%
• An 11% increase in adjusted operating profit
• Free cash flow of £831m versus £369m a year earlier

On the back of these results, the company increased its H1 dividend by 11%. That’s a decent hike although the stock’s yield is only around 1.6% at the moment.

Looking ahead, Haleon provided new FY24 guidance. It now expects organic revenue growth to be between 4% and 6% and organic operating profit growth to be in the high single digits.

We are well positioned to deliver on our full year organic revenue growth guidance and now expect high-single digit organic profit growth. Given the successful delivery of the strategy to date Haleon is also well placed over the medium term.

CEO Brian McNamara

Overall, the results showed that the company has some momentum right now.

Any value on offer?

What about the valuation though?

Well, at present, City analysts expect Haleon to generate earnings per share of 18.1p this year and 19.6p next year.

So, at today’s share price of 375p, the forward-looking price-to-earnings (P/E) ratio here is 20.7, falling to 19.2 using next year’s earnings forecast.

It’s hard to know to think of those multiples, in my view.

On the one hand, Haleon owns a portfolio of top consumer healthcare brands and has relatively steady revenues. So, it probably deserves a premium valuation.

It’s worth noting that since the H1 numbers, analysts at Berenberg have raised their target price to 447p from 410p. That new target is nearly 20% above the current share price.

On the other hand, there’s quite a bit of debt on the company’s balance sheet. At 30 June, net debt was £8,415m, which equates to a net debt/EBITDA multiple of 2.9 (that’s relatively high).

One other risk here is consumer weakness. If consumers continue to rein-in spending, they could trade down to cheaper consumer healthcare brands.

Should I buy?

Weighing everything up, I’m going to hold off on buying Haleon shares for my portfolio for now.

I do think there’s a lot to like about this company from an investment perspective.

However, all things considered, I think there are better opportunities in the market for me today.

The post The Haleon share price has woken up. Should I buy the FTSE 100 stock now? appeared first on The Motley Fool UK.

Haleon is a Weybridge-based healthcare company behind top-name brands like Sensodyne, Panadol, and Advil. It was created in July 2022 when pharma giant GSK demerged its consumer healthcare business. It started trading on the London Stock Exchange the same day, with GSK shareholders receiving equivalent shares at a 1:1 ratio.

Since listing, the share price has traded relatively sideways in a tight range between 308p and 352p. This morning’s results spiked it to a new all-time high of 360p, although it’s now a little lower than that.

Solid results

This morning’s results revealed an adjusted operating profit of £1.29bn, up 11% from the previous year. This was fuelled by lower cost inflation and savings from the closure of its Maidenhead branch.

Net debt stands at £8.4bn with free cash flow up to £831m from £369m in H1 2023. Despite its debt rising significantly since listing, the company still has sufficient reserves to cover interest payments by 6.3 times.

Although revenue declined 8% to £5.69bn, the firm stated it’s on track to deliver on full-year organic revenue growth guidance. Overall, the results appear to have been met with a positive reaction from shareholders.

On announcing the results, Haleon CEO Brian McNamara said: “Haleon reported a good first half, with solid organic revenue growth and strong organic operating profit growth, demonstrating that our strategy is delivering.” 

He also noted market share performance, with “69% of the business gaining or maintaining share.”

Along with the results, the company announced a £135m share buyback programme.

US product launch

Today’s statement provided additional guidance on the rollout of Eroxon, the first topical erectile dysfunction treatment approved for over-the-counter sale by the US Food & Drug Administration (FDA). Haleon is working in partnership with Futura Medical to get the product to market.

The announcement outlined the company’s belief that the product addresses “a significant unmet consumer need” and will be “available in-market before the end of this year.”

UK-based Futura expects to enjoy further success from the collaboration. When the partnership was announced in July last year, Futura shares climbed 12% on the news.

My thoughts

Haleon has been fairly quiet since listing, with sparse news and little action from its share price. This is the first set of results that have prompted a significant price jump, positioning the company well for future growth.

But growth comes at a cost. With a price-to-earnings (P/E) ratio of 29.5, it’s well above the market average of 16.7. GSK, by comparison, has a P/E ratio of only 13.8. It’s also undervalued by 67% based on future cash flow estimates, whereas Haleon is overvalued by 14%.

While I’m impressed by the results, I’m not tempted enough to buy the shares today. At the moment, my portfolio is already heavily weighted to several health and pharmaceutical stocks in the UK and abroad. However, I’ve added it to my watchlist, alongside GSK.

The post Haleon’s share price leaps 3% as first-half results reveal 11% profit increase. Is it time I buy? appeared first on The Motley Fool UK.

This was the first full year of earnings from the consumer healthcare giant since it was spun out from GSK in July 2022.

What was so good in the report to send the shares up today? Let’s dig in.

A solid year

In 2023, Haleon’s revenue increased 4% to £11.3bn from £10.8bn the year before. Adjusted constant currency operating profit grew faster, rising 10.4% to £2.5bn, representing a slightly higher 22% operating margin.

However, adjusted diluted earnings per share (EPS) actually fell 6% to 17.3p. Management said this was largely down to annualisation of interest costs and adverse foreign exchange movements.

Meanwhile, net debt was £8.6bn at the end of December. That’s down by over £2bn since its demerger from GSK. So this is encouraging.

Plus, it recently offloaded its Lamisil antifungal business and agreed to sell its Chapstick lip balm brand for $510m.

All in all, I’d say it’s steady away here. The firm is never going to grow gangbusters due to the maturity of the industry and its brands. But there’s reliable revenue and earnings, and a £500m share buyback has been launched to complement the modest 1.8%-yielding dividend.

Setting targets

The reason for the share price jump today is likely related to stronger-than-anticipated guidance.

For 2024, the company said it expects organic growth between 4% and 6%. That was a wider range than the 4.4% analysts were expecting.

Looking further out to the medium term, it’s also targeting annual organic revenue growth of 4%-6%.

And it wants to get its net debt/adjusted EBITDA down from 3 times today to around 2.5 times. A lower ratio suggests that the company will be better positioned to manage its debt obligations.

A defensive stock with strong brands

The company boasts an extensive global portfolio of brands that covers the entirety of consumer healthcare. There’s Panadol pain relief, Sensodyne toothpaste, and Centrum multivitamins.

The diversification in products and geography is one reason to consider investing. And the constant nature of demand for mouth wash, flu remedies and whatnot makes this a defensive stock. So it could play an important stabilising role within a diversified portfolio.

Speaking personally, though, consumer healthcare is probably one area where I don’t show much brand loyalty. I do for my teabags and trainers, but not so much for toothpaste and painkillers. Call me tight, but I normally go for the ones that are on offer!

Of course, the company is now bringing in more than £11bn in revenue a year. So clearly, there’s a strong sense of loyalty among plenty of other consumers. But this issue does keep returning to my mind when I consider whether I should invest.

Also, management said it expects the “challenging” operating environment to remain this year. Could consumers feeling the pinch start trading down to cheaper brands? It’s a possibility.

Finally, the stock is trading at a price-to-earnings multiple of 19. Unfortunately, I don’t see much value at that price, especially when there are so many cheap UK stocks around today.

On balance, I’d rather focus on other FTSE 100 stocks that are disapplying faster growth or have juicier dividends.

The post Here’s why the Haleon share price jumped 6% higher today appeared first on The Motley Fool UK.

Back in vogue

Marks & Spencer (LSE:MKS) has enjoyed a stellar year, capped off with being promoted back to the FTSE 100. The share price has almost doubled over the past year.

In the half-year results, profit before tax and adjusted items jumped by 75% versus the same period last year. In part, this helped the reinstatement of a dividend from the firm, of 1p per share.

This is the first dividend paid since 2020 and marks the start of what I believe to be a strong dividend run in coming years. The forecast is for a dividend of 2p with the full-year results in February, along with a 2.9p payment with the half-year results. The total figure of potentially 4.9p is a huge jump from the 1p.

Granted, even with this jump in the dividend forecast, the yield isn’t likely to rise above the FTSE 100 average. Yet this is one to watch for the long-term prospects even beyond 2024.

I need to be careful as inflation and the cost-of-living crisis could dampen revenue as customers cut back on spending. Yet M&S has so far been able to ride this risk out well in 2023.

Standing alone

Haleon (LSE:HLN) was spun out of the pharma giant GlaxoSmithKline (now GSK) back in July 2022. Since then, it has been doing well, with the share price up 16% over the past year.

It’s still early in building a track record of dividend payments. However, by comparison to the 2.4p and 1.8p payments from the past year, 2024 looks a lot better. The current forecasts for 2024 are for payments of 3.7p and 2.1p, totalling 5.8p. This would be a 40% jump.

This jump makes sense when I look at the financial results for so far this year. In November, the trading update showed revenue up 8% year-to-date versus 2022. For the full-year, adjusted operating profit growth is expected in the 9-11% region.

These numbers might not sound huge, but it’s key to remember that sector is mature. Sure, I believe it’ll continue to grow over the next decade, but this isn’t an area booming like artificial intelligence (AI). So the percentage growth figures from Haleon are actually very strong in comparison to the rest of the sector.

As a risk, I’m aware that the pharma sector is a tough area to stay in, given the established nature of existing companies. This is something Haleon needs to factor in to the future strategy plans.

I’m estimating the dividend yield to be slightly below the FTSE 100 average next year for Haleon, even with a 40% jump in the dividend per share. Yet I think this yield has the potential to rise significantly when looking out over the course of the next five or 10 years.

I’m considering adding both stocks to my portfolio for the future.

The post Here are some of the best dividend forecasts I’ve seen for 2024 appeared first on The Motley Fool UK.

Given the challenging investing backdrop, I feel that’s a resilient showing. And on that basis, I’m wondering whether the FTSE 100 stock could make a decent defensive addition to my portfolio.

Strong brands and fair value

There are a few things that appeal to me as a potential investor.

For starters, with a market cap of £29.8bn, Haleon is the world’s largest standalone consumer healthcare firm. So it has scale and is profitable (it made £1.6bn in operating profit last year).

Additionally, its five brand categories cover the full range of consumer health: Oral Health; Vitamins, Minerals and Supplements; Pain Relief; Respiratory; and Digestive Health. And it has strong brands across each of those categories, including Sensodyne toothpaste and Panadol painkillers.

In theory, these trusted brands should give the company pricing power to sustain and grow profits.

Another positive is that Haleon pays a dividend. For 2023, analysts are forecasting a total payout of 5.51p per share. That translates to a dividend yield of about 1.7% at the current share price.

Finally, the shares don’t appear overvalued. They’re trading on a forward-looking price-to-earnings (P/E) ratio of around 18. For 2024, the forward P/E multiple drops to 16.7. That’s about in line with other consumer-focused businesses like Diageo, Unilever, and Reckitt Benckiser.

Q3 results

In Q3, the firm said that organic revenue rose 5% year on year to £2.8bn, while operating profit increased slightly to £584m.

However, overall volumes for the quarter declined by 1.6%. This means that growth was driven by price rises.

Are cash-strapped consumers now opting for cheaper unbranded alternatives? That’s a risk, though we can’t be sure from a single quarter.

Looking forward, Haleon still expects full-year organic revenue growth of 7%-8% and adjusted operating profit growth of between 9% and 11% (on a constant currency basis).

While those are healthy numbers, net debt stood at a hefty £9.5bn in June (down from £10.7bn at the demerger).

Another issue is that GSK raised £885m recently from selling part of its stake in Haleon. It still has a 7.4% shareholding, and Pfizer also has a lot of shares that it plans to sell. I’m concerned this could put downward pressure on the Haleon share price in the coming months.

My decision

Still, I think the stock has a lot going for it. The permanent demand for consumer healthcare products gives it a defensive quality that could play an important role in my portfolio.

Longer term, Haleon also has the opportunity to consolidate quite a fragmented global market. That said, acquisitions are costly and I’m already not keen on that large net debt position.

Plus, speaking personally, I do flinch every summer at the price of some branded hay fever tablets (and painkillers). Especially when there are far cheaper alternatives next to them.

That’s not typically the case with food and drinks brands, though, where I have my go-to favourites. So I do worry that the consumer healthcare market suffers from a relative lack of brand loyalty from consumers.

Weighing everything up, I’m going to pass on the stock. I feel there are better FTSE 100 opportunities for my money today.

The post The Haleon share price is stuck at £3! Should I invest? appeared first on The Motley Fool UK.