Does defensive Haleon have a cure for the current market blues?
Last updated: 09:30 09 Apr 2025 EDT, First published: 09:21 09 Apr 2025 EDT
Haleon PLC (LSE:HLN, NYSE:HLN) is well positioned for the current uncertain climate, analysts at Citi and Barclays believe, relatively protected from the worst of Donald Trump's new tariffs.
Ahead of its first-quarter sales on 30 April, Citi described the consumer healthcare group as a solid defensive play for investors concerned about recession risks and the fallout from the US tariff regime.
Barclays, meanwhile, also pitched Haleon as one of the most defensive stocks in its large-cap European consumer staples coverage, with tariff risk expected to have only a limited impact.
Shares in the maker of household brands such as Sensodyne, Panadol and Centamin, have been under pressure amid broader worries over US consumer demand and a tough comparison with last year’s strong flu season.
Citi sees those headwinds, including weaker volumes in the US vitamins market and later-than-usual flu reorder cycle, as already well flagged.
It expects organic sales growth of 3.4% in the first quarter, enough to keep full-year forecasts intact.
More importantly, the American bank highlights several reasons why Haleon stands out in today’s volatile environment.
It estimates tariffs would shave just 20 basis points off gross profit, owing to the company’s limited direct exposure and the price resilience of its over-the-counter products.
The group also generates strong free cash flow, allowing it to reduce net debt by about half a turn of EBITDA each year; something many peers will struggle to match if conditions tighten further.
Looking ahead, analysts see a clear set of catalysts. A capital markets day (CMD) is due on 1 May, while US retail channels are expected to rebuild flu-related inventories in the second half, following a strong end to the 2024 season.
The CMD's focus is expected to be on supply chain efficiency, Barclays noted, with chief supply chain officer Namrata Patel, who joined in November 2023, presenting.
Barclays, which raised its price target to 452p from 445p, said: "Macro visibility is currently extremely limited, as such we like Haleon's relative insulation from both tariff risk and wider consumer weakness.
"In the event of macro visibility and expectations improving, Haleon is likely to be left behind in any relief rally, but for now we find its defensiveness appealing."
