Henkel Earnings: Solid Sales and Margin Momentum Drive 2024 Guidance Increase

Narrow-moat Henkel reported first-quarter 2024 organic sales growth of 3%, slightly ahead of the Vara consensus of 2.7%. The group saw resilient pricing and sequential improvement in volumes across both operating segments. Given the solid momentum, management recently upgraded the full-year guidance, now expecting adjusted EPS growth of 15%-25% from 5%-20% previously. This should be driven by stronger organic sales growth in the range of 2.5%-4.5% (from 2%-4% previously) and a higher adjusted EBIT margin in the range of 13%-14% (from 12%-13.5% previously). The share price has soared around 20% over the last six months, converging to our fair value estimate, which we increase by 5% to EUR 86 to account for the time value of money and an improvement in our short-term forecast. Our 2024 forecast calls for organic sales growth of 3.7% and an adjusted EBIT margin of 13%, compared with 2.4% and 12.4% previously, respectively.