Haleon Earnings: Tough Comparisons and Macro Challenges Don’t Stop Haleon From Winning

Wide-moat Haleon reported solid second-quarter earnings and delivered better-than-anticipated results. Total sales of GBP 2.8 billion were up slightly, 0.8% year over year, and we had expected a slight decline in the top line. Despite pain relief and respiratory health segments facing volume challenges from lapping last year's unusually high volume thanks to inventory stocking in China, the other three product groups enjoyed nice organic growth. This was thanks to core brands like Sensodyne and Centrum touting their brand intangibles and winning shares. At the firm-wide level, price gain of 3.4% and volume/mix of 0.7% puts Haleon at the top among other consumer packaged goods players. We think new product launches, including Sensodyne Clinical White and continued investment behind advertising and promotion through partnerships with healthcare professionals are paying off. These helped the firm combat pressures from difficult macro environment and price-wary consumers. After mildly ticking up our near-term assumptions, accounting for time value of money impacts, and a slightly more favorable foreign exchange rate, we raise our fair value estimate to $9.50 (GBX 372) per share from $8.80 (GBX 352).