Haleon Placed on Negative Catalyst Watch by J.P. Morgan on Slowing Sales

J.P. Morgan has placed consumer health company Haleon on a negative Catalyst Watch, citing concerns that slowing sales momentum will pressure the company's growth targets and earnings. The bank maintained its "underweight" rating on the stock ahead of Haleon's upcoming results on October 29.

Sales Momentum Weakens

The negative watch was initiated as analysts at the bank see third-quarter like-for-like (LFL) sales growth tracking at 3%, according to a research note. This performance would place Haleon at the bottom of its 3%-5% annual guidance range for the second consecutive year.

J.P. Morgan argues this trend makes Haleon’s medium-term target of 4%-6% LFL growth "increasingly difficult to sustain." The bank anticipates the company may need to reset its medium-term sales growth target in February 2027 and rebase its growth expectations.

Underlying Growth and Margin Concerns

Beyond the immediate sales figures, the bank flagged deeper structural issues. Analysts noted that Haleon's core over-the-counter (OTC) and vitamins, minerals, and supplements (VMS) segments, which constitute about 70% of sales, are losing global market share in structurally slow-growing markets.

Volume growth has been lackluster, averaging only about 1% per year since 2022. J.P. Morgan also questioned the quality of recent margin gains, stating that the roughly 200-basis-point expansion expected over 2024-26 is driven by cost savings rather than operating leverage, leaving less room for future improvement without reinvestment.

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Revised Estimates and Price Target

Reflecting this cautious outlook, J.P. Morgan has lowered its financial forecasts for Haleon. The bank's 2028 adjusted earnings per share (EPS) estimate is now approximately 7% below the market consensus.

Key forecast reductions include:

• 2027 adjusted EPS cut by 3% to 22 pence.
• 2028 adjusted EPS cut by 5% to 23.09 pence.
• 2027 LFL growth lowered to 3.3%, significantly below the consensus of 4.3%-4.4%.

Consequently, J.P. Morgan reduced its December 2027 price target for Haleon stock to 295 pence from 315 pence. The bank also noted that lower U.S. flu incidence year-over-year removes a potential near-term tailwind for the business.