Haleon (HLN) share price has retreated in the past few weeks, erasing some of the gains made earlier this year. Its London stock dropped to 375p, its lowest point since August 29, while its American ADR fell to $9.90, down by 7% from its highest level this year.
Haleon is a top FMCG company
Haleon is one of the biggest companies in the fast-moving consumer goods (FMCG) industry. It emerged from GlaxoSmithKline, which spun it off into an independent company in 2022.
Since then, other companies have done that. Johnson & Johnson created Kenvue, while 3M created Solventum, which focuses on wound care, oral care, and biopharma filtration.
Other similar firms like Novartis and Bayer have considered those moves recently, a move that will help them to streamline their operations.
Haleon is a major player in the FMCG industry, where it sells some of the biggest brands in areas like oral health, vitamins, minerals, and supplements, respiratory, pain relief, and digestive health.
Some of the top brands in its portfolio are Sensodyne, Parodontax, Centrum, Theraflu, Panadol, and Advil. These are highly popular brands that are sold around the world.
Haleon and other firms in the industry have gone through a difficult time in the past few years. They have faced logistical challenges, high cost of raw materials, and weak consumer spending in most countries because of inflation.
In Haleon’s case, its annual revenue came in at $13.5 billion in 2020 and then dropped to $12.9 billion in 2021. It then bounced back and reached a high of $14.4 billion last year.
Read more: 3M healthcare spinoff Solventum slides on NYSE debut
Haleon has solid fundamentals
Analysts believe that Haleon has some of the best fundamentals in the FMCG industry. For example, unlike Kimberly-Clark and Clorox, its brands are more defensible because it has a smaller threat from private label brands.
This is notable since more people select private label brands when shopping because they are of a higher quality and often cost much less.
Additionally, Kenvue trades at a lower valuation metrics than other companies in the industry. It has a price-to-calendar year 2025 price-to-earnings metric of 20x, much lower than other popular brands.
For example, Church & Dwight, Beiersdorf, L’Oreal, Colgate-Palmolive, and Estee Lauder have a multiple of over 25. Similarly, other brands like Procter & Gamble and Clorox are more expensive than Haleon, despite its higher margins.
Haleon has a gross profit margin of 62.5%, higher than Kenvue’s 57.5%, Beiersdorf’s 58%, P&G’s 51%, Unilever’s 42.9%, and Church & Dwight’s 45%. Its EBITDA margin of 23% is also higher than the other companies.
Additionally, its total returns have been relatively strong since May 2023. It has returned 16%, second only to Colgate-Palmolive, which has returned about 30%. It has beaten most of its peers in this period.
The next important catalyst for the Haleon share price will be its earnings, which will come out on Friday.
Its most recent half-year results showed that the company had an organic growth of 3.5%, with most of it happening in the second quarter.
Most of the organic growth happened in oral health, VMS, and digestive health, whose organic revenue rose by 9.9%, and 9.2% and 4.9%, respectively. It was offset by a 4.4% and 2.3% drop in the pain relief and respiratory health segments. Haleon’s business did well because of a combination of higher volume and pricing.
Analysts expect this week’s results to show that Haleon’s revenue rose to £2,83 billion in the third-quarter. They also expect that its full-year revenue will be £11.2 billion, followed by £11.52 billion, and £12 billion in the next two financial years.
Its adjusted EBIT will also rise gradually from £2.5 billion, £2.63 billion, and £2.804 billion in the next three financial years. Therefore, the Haleon share price will do well if the company publishes strong financial results.
Analysts believe that the Haleon stock price is highly undervalued, with a 15% upside.
Haleon share price analysis
Haleon chart by TradingView
The daily chart shows that the HLN share price peaked at the psychological point at 400p earlier this year.
It has dropped below the 50-day Exponential Moving Average (EMA) and is inside the Ichimoku cloud indicator.
Haleon’s MACD indicator has pointed downwards and moved below the zero line. The Relative Strength Index (RSI) and the Money Flow Index (MFI) indicators have continued moving downwards.
Therefore, the short-term outlook for the stock is moderately bearish, with the next point to watch being at 350p. Such a move will be bullish because it is known as a break and retest pattern, which is a bullish continuation pattern.
The post Is the Haleon share price in trouble ahead of earnings? appeared first on Invezz
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