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On Tuesday, Jefferies reiterated its Buy rating on Haleon PLC (HLN:LN) (NYSE: HLN), maintaining a price target of GBP4.50. Currently trading at $9.20, InvestingPro analysis suggests the stock is slightly overvalued, though analyst targets range from $9.50 to $11.41. The firm's analysts anticipate growth to accelerate in the fourth quarter compared to the third quarter's 6.1% increase. This forecast is based on consistent volume growth in North America, the normalization of vitamin and mineral supplement (VMS) comparatives, and the anticipated launch of Eroxon in the United States.
The analysts are confident in Haleon's ability to achieve 5-6% organic sales growth (OSG) in both the short and midterm. With impressive gross profit margins of 62.2% and an EBITDA of $3.59 billion in the last twelve months, the company has demonstrated strong financial performance. InvestingPro data reveals several additional positive indicators, including strong financial health metrics and low price volatility with a beta of 0.24.
However, as these external factors begin to wane, Jefferies expects Haleon to experience a more comprehensive reevaluation. This optimism is supported by what they consider to be the company's leading progression in organic sales and profit.
Haleon's performance in North America has been a key driver for their positive outlook, with consistent underlying volume growth contributing to the company's overall success. Additionally, the normalization of the VMS market comparatives is seen as a favorable development, potentially leading to steadier sales in that segment.
The upcoming launch of Eroxon in the U.S. market is also anticipated to contribute to Haleon's growth. This product introduction is part of the reason Jefferies forecasts a 6.3% growth for the fourth quarter, slightly above the Visible Alpha consensus of 6.2%.
The analysts' commentary sheds light on the challenges Haleon has faced due to less controllable influences such as currency exchange rates and the impact of mergers and acquisitions. These factors have previously hindered the company's margin leverage, but as they begin to abate, Jefferies envisions a more robust valuation for Haleon.
In summary, Jefferies' outlook for Haleon is based on the company's consistent volume growth in key markets, the stabilization of the VMS segment, and the introduction of new products. With a market capitalization of $41.5 billion and proven profitability generating $1.6 billion in net income, the company shows strong fundamentals. For deeper insights into Haleon's financial health and growth potential, InvestingPro subscribers can access comprehensive analysis and additional metrics in the exclusive Pro Research Report, available for over 1,400 top stocks.
In other recent news, Haleon plc has reported impressive earnings and revenue results, including a £230 million off-market share repurchase from Pfizer Inc. (NYSE:PFE) The company increased its stake in the Chinese joint venture, Tianjin TSKF Pharmaceutical (TADAWUL:2070) Co. Ltd, to 88%, and finalized the divestment of its nicotine replacement therapy business to Dr. Reddy's Laboratories SA in a deal worth up to £500 million. Haleon's Chief Financial Officer, Dawn Allen, vested an award of Haleon Ordinary Shares and sold a portion to cover tax obligations, retaining a significant number of shares.
Key changes to Haleon's board were also announced, with David Denton resigning as a Non-Executive Director and Bláthnaid Bergin stepping in as an independent Non-Executive Director. In terms of analyst ratings, Bernstein downgraded Haleon's stock from 'Outperform' to 'Market Perform', Morgan Stanley (NYSE:MS) maintained an Overweight rating, Goldman Sachs downgraded Haleon's stock from "Buy" to "Neutral," and Berenberg initiated coverage with a "Buy" rating.
Two of Haleon's key executives, General Counsel Adrian Morris and Chief Marketing Officer Tamara Rogers (NYSE:ROG), acquired shares as part of the company's Share Reward Plan, each receiving 33 ordinary shares and an equivalent number of Matching Shares at no cost.
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