Haleon results could provide tonic for investor anxiety, says Barclays

When Haleon PLC (LSE:HLN, NYSE:HLN) reports results on Thursday, 27 February, Barclays expects its sales of painkillers to have offset the "well known headwind" from a weak start to the cold and flu season in the final quarter of 2024.

Analysts at the bank said that earnings delivery and profit margin expansion are the main areas of focus for investors in the FTSE 100 consumer health products group too, while Futura Medical investors are likely to be keeping an eye out for news on the Eroxon collaboration. 

Rivals have reported an "especially weak" cold & flu season in the US and China, but Barclays think momentum elsewhere in the portfolio should help deliver 6%-plus organic sales growth in the fourth quarter.

Growth for the Vitamins, Minerals & Supplements (VMS) and Oral Hygiene arms is predicted to have remained strong, with "an acceleration in Pain" driven by the Middle East, Africa and southern Europe. 

A recent uptick in respiratory cases in the US along with stronger January industry data both "bode well" for cold & flu in the first quarter of 2025.

Whether Haleon can deliver earnings per share growth targets has been a "key debate" among investors, the Barclays team says, estimating that the three recent disposals of Lamisil, Chapstick and smoking cessation devices outside the US have been a cumulative headwind of around 10% to EPS.

"With further disposals looking unlikely in the foreseeable future, and Haleon spending £1 billion buying back shares and minorities in recent months, cash and balance sheet items have gone from being a headwind to EPS to a tailwind.

"We view this as an important inflection point for EPS delivery," the analysts said, also noting that from this year onwards EPS delivery will be 30% of management's bonus compared to 0% previously.

On margins, the analysts think investors are "anxious for Haleon to deliver margin expansion this year, and we expect this to be achieved despite a circa 70bp [basis point] headwind from disposals".

With forex anticipated to provide a modest margin tailwind, Barclays is looking for Haleon to deliver at least 80-90bp underlying margin expansion in 2025, "with risks to the upside given the phasing of cost savings".

In conclusion, Barclays sees Haleon "offering amongst the best top​-​line visibility in large​-​cap European staples and we continue to like it. We like the Consumer Health space, and see Haleon performing better than the other large​-​cap listed pureplay companies."

The VMS business is also predicted be a potential beneficiary of increasing use of GLP-1 weight loss drugs from the likes of Novo Nordisk.