On Tuesday, the consumer healthcare company Haleon Plc. (NYSE: HLN) received a positive outlook from Berenberg, as the firm initiated coverage with a Buy rating and set a stock price target of $114.00. The new rating is based on the anticipation of organic sales growth and the upcoming launch of Eroxon in the United States.
According to the firm, Haleon is expected to see a 5.1% increase in organic sales for the financial year 2024, with a significant 4.2% growth in volume/mix during the second half of the year. This projection aligns with the revised assumption that Eroxon, a new product, will be introduced to the U.S. market in the fourth quarter of 2024. Additionally, the firm forecasts that Haleon will overcome previous one-off volume headwinds.
The analysis also suggests that operating leverage in the latter half of 2024 should balance out the additional investments currently being made to prepare for Eroxon's launch. Despite these expenditures, the full-year adjusted EBIT margin forecast remains stable at 22.6%. The firm slightly raised its earnings per share forecast for FY 2024 by less than 1%.
The updated stock price target of GBp447, up from the previous GBp410, reflects a discount cash flow that incorporates a risk-free rate of 4.1%, adjusted in response to recent bond yield movements. Berenberg's 12-month price target for Haleon's American Depositary Receipts (ADRs) has been set at $11.44, based on the current exchange rates.
Berenberg highlights Haleon's valuation as undemanding, pointing to a 2025 price-to-earnings ratio of 18 times. The firm also emphasizes the company's growth profile, projecting a medium-term organic sales growth of 5.6% and a 9.8% increase in earnings per share growth between 2025 and 2030, suggesting that the company's stock is currently undervalued.
In other recent news, Haleon, a global healthcare company, has experienced significant developments. Goldman Sachs revised its rating on Haleon stock, shifting from "Buy" to "Neutral," citing overvaluation despite the company's strong market performance. The investment firm also increased Haleon's price target to £3.80, up from £3.60.
In terms of earnings and revenue, Haleon reported slight growth in North America for the first half of 2024 and projected an optimistic sales growth outlook for the second half of the year despite facing some challenges. The company also plans to buy back shares, expecting this to benefit earnings per share (EPS) as the share count decreases.
Furthermore, Haleon has extended its joint venture in China by nine months, despite reporting flat growth in the region. The company anticipates strong growth in oral health and vitamins, minerals, and supplements (VMS), with pain relief expected to improve.
New product launches in the Oral Care segment and an erectile dysfunction cream, Eroxon, are slated for later in the year. These recent developments reflect the company's strategic decisions aimed at fostering growth and maintaining profitability.
InvestingPro Insights
As Haleon Plc. (NYSE: HLN) garners a favorable outlook from Berenberg with a Buy rating, it's essential to consider additional financial metrics and market behaviors that could influence investor decisions. InvestingPro data highlights a robust gross profit margin of 62.54% for the last twelve months as of Q2 2024, underscoring the company's efficiency in managing its cost of goods sold and suggesting a strong underlying business model. This aligns with Berenberg’s optimism regarding Haleon's sales growth and operational leverage.
Moreover, the company's stock has shown a strong return over the last month, with a 12.28% price total return, indicating a positive market reaction that could be associated with expectations surrounding the upcoming launch of Eroxon and the company's growth prospects. This performance is also reflected in the stock trading near its 52-week high at 97.74% of the peak price.
InvestingPro Tips further enrich this picture. The stock's low price volatility may appeal to risk-averse investors, while the moderate level of debt suggests a balanced approach to financing its operations. For investors seeking more comprehensive analysis, InvestingPro offers additional tips, including insights on the company’s short-term liquidity and profitability predictions for the year. There are a total of 8 additional InvestingPro Tips available to provide a deeper understanding of Haleon's financial health and market potential.
For investors considering Haleon's future, these insights, combined with Berenberg's analysis, offer a multifaceted view of the company's financial standing and market performance. The InvestingPro platform provides a wealth of tips and data for those looking to make informed investment decisions.
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