Kenvue’s SWOT analysis: stock faces headwinds amid strategic shifts

Kenvue Inc. (NYSE: KVUE), the world’s largest pure-play consumer health company, is navigating a complex landscape of challenges and opportunities following its spin-off from Johnson & Johnson. The company, known for iconic brands such as Tylenol, Neutrogena, and Listerine, is grappling with declining organic sales, regulatory scrutiny, and the need for operational improvements across its diverse portfolio.

Recent Performance and Challenges

Kenvue has faced significant headwinds in recent months, with organic sales declining 4.2% year-over-year in the second quarter of 2025. This decline was observed across all three of the company’s segments: Self Care (-5.9%), Skin Health & Beauty (-3.7%), and Essential Health (-2.4%). As a result, Kenvue has revised its 2025 outlook, now projecting low-single-digit declines in organic sales, a stark contrast to the previously anticipated 2-4% growth.

The company’s challenges extend beyond financial performance. Kenvue is currently embroiled in controversy surrounding its flagship brand, Tylenol. Recent media reports have highlighted an upcoming study by the Department of Health & Human Services, suggesting a potential link between prenatal use of acetaminophen, Tylenol’s active ingredient, and an increased risk of autism spectrum disorder (ASD) and attention deficit hyperactivity disorder (ADHD). While the U.S. Food and Drug Administration (FDA) has not confirmed any new findings or established a causal link, the news has sparked investor concern and contributed to a significant sell-off in Kenvue’s stock.

Strategic Initiatives and Leadership Changes

In response to these challenges, Kenvue’s board of directors has initiated a strategic review to enhance shareholder value. The company has also undergone leadership changes, with Kirk Perry stepping in as Interim CEO. These moves come as Kenvue attracts interest from activist investors, including Starboard Value, Third Point, and Sachem Head Capital Management, signaling potential pressure for more aggressive strategic actions.

Kenvue’s management has outlined a strategy focused on simplifying operations, reducing complexity, strengthening leadership, and improving execution. The company has introduced its "Extraordinary Powers" strategy, which is expected to influence its operational success goals for the fiscal year 2025. This initiative aims to streamline the business and drive innovation across its product lines.

Segment Analysis and Growth Prospects

Despite the overall challenges, Kenvue maintains strengths in its diverse portfolio. The Self Care and Essential Health segments, while experiencing recent declines, have historically shown resilience. The Skin Health & Beauty segment, however, has struggled more significantly but shows potential for recovery.

Analysts at Canaccord Genuity suggest that if Kenvue can improve operations, particularly in the Skin Health & Beauty segment, there could be substantial value creation. Early signs of recovery are observed in key brands like Neutrogena and Aveeno, as indicated by Circana data and management commentary on improving consumption trends.

Financial Outlook and Valuation

Despite the current challenges, Kenvue maintains a solid financial foundation. The company boasts a gross profit margin of 58.15% and offers an attractive dividend yield of 4.53%. Earnings per share (EPS) for 2025 are estimated at $1.04, with projections showing gradual increases through 2029. InvestingPro analysis reveals the company operates with moderate debt levels and maintains a healthy Altman Z-Score of 4.04, indicating strong financial stability. Want deeper insights? InvestingPro offers exclusive access to over 30 additional financial metrics and expert analysis for KVUE.

Kenvue’s stock currently trades at a forward price-to-earnings (P/E) ratio of 19.7, which some analysts view as potentially undervalued given the company’s market position and brand strength. The price-to-earnings-growth (PEG) ratio of 0.96 further supports this perspective.

Market Position and Competitive Landscape

As the largest pure-play consumer health company globally, Kenvue faces competition from both established consumer goods conglomerates and niche players. The company’s diverse portfolio, which includes over-the-counter medicines, skincare products, and essential health items, positions it well to capture market share across multiple segments.

However, Kenvue must contend with increased scrutiny of its products, particularly Tylenol, which accounts for approximately 15% of U.S. sales and is likely the company’s largest profit contributor. The premium pricing of Tylenol, which commands a 25% premium over private label alternatives, may come under pressure if regulatory concerns persist.

Bear Case

How might the Tylenol controversy impact Kenvue’s financial performance?

The ongoing controversy surrounding Tylenol and its potential link to neurodevelopmental disorders poses a significant risk to Kenvue’s financial performance. Tylenol is a key contributor to the company’s profits, and any decline in consumer trust or regulatory action could lead to decreased sales and market share. Additionally, the company may face increased legal and liability risks, potentially resulting in costly settlements or damages. The uncertainty surrounding this issue could also delay strategic opportunities and hinder decisive actions by management, further impacting shareholder value in the near term.

What challenges does Kenvue face in improving its underperforming segments?

Kenvue’s underperforming segments, particularly Skin Health & Beauty, present significant challenges for the company. Historical underinvestment in key brands has led to market share losses and declining sales. The complexity of separating or spinning off the intertwined Skin Health & Beauty business adds another layer of difficulty to potential strategic actions. Moreover, the company’s interim leadership may struggle to implement decisive changes quickly, potentially prolonging the turnaround process. The success of Kenvue’s recovery in these segments heavily depends on the effective execution of management’s initiatives, which carries inherent risks and uncertainties.

Bull Case

How could Kenvue’s new strategic initiatives drive growth?

Kenvue’s "Extraordinary Powers" strategy and focus on operational improvements present significant opportunities for growth. By simplifying operations and reducing complexity, the company can potentially unlock cost savings and improve efficiency across its portfolio. The renewed focus on strengthening leadership and improving execution could lead to better innovation and marketing strategies, particularly in the underperforming Skin Health & Beauty segment. If successful, these initiatives could drive organic sales growth, expand margins, and ultimately enhance shareholder value. The company’s global footprint also provides opportunities for expanding successful brands into new markets, potentially accelerating growth in the medium to long term.

What potential value could be unlocked through operational improvements?

Operational improvements across Kenvue’s segments could unlock substantial value for shareholders. Analysts at Canaccord Genuity suggest that if Kenvue can improve operations, particularly in the Skin Health & Beauty segment, the company’s sum-of-the-parts valuation could rise significantly. For instance, if the Skin Health & Beauty business achieves a 20% EBITDA margin and increases sales by 10% from current levels, its value could potentially double. Additionally, streamlining operations and reducing complexity could lead to improved free cash flow generation, allowing for increased investment in growth initiatives or returns to shareholders through dividends and share repurchases.

SWOT Analysis

Strengths:

• Strong portfolio of well-known consumer health brands
• High gross profit margins (58.24%)
• Diverse product offerings across multiple segments
• Global market presence with potential for expansion

Weaknesses:

• Declining organic sales across all segments
• Underperformance in the Skin Health & Beauty segment
• Historical underinvestment in key brands
• Interim leadership during a critical strategic period

Opportunities:

• Potential for operational improvements and cost savings
• Strategic review to unlock shareholder value
• Global expansion of successful brands
• Innovation and product development in high-growth categories

Threats:

• Ongoing controversy and potential litigation related to Tylenol
• Regulatory scrutiny and potential changes in product guidelines
• Competitive pressures from both established and niche players
• Macroeconomic headwinds affecting consumer spending

Analysts Targets

• Evercore ISI (September 8th, 2025): $23.00
• UBS (September 8th, 2025): $23.00
• BofA Securities (September 7th, 2025): $25.00
• Barclays (August 7th, 2025): $22.00
• Canaccord Genuity (May 21st, 2025): $29.00
• RBC Capital Markets (May 9th, 2025): $24.00
• Piper Sandler (May 5th, 2025): $27.00

Kenvue Inc . faces a critical juncture as it navigates regulatory challenges, operational improvements, and strategic shifts. While the company’s strong brand portfolio and global presence provide a solid foundation, its ability to address current headwinds and capitalize on growth opportunities will be crucial in determining its future success. Investors and analysts will be closely watching Kenvue’s progress in implementing its strategic initiatives and resolving ongoing controversies as they assess the company’s long-term value proposition.

This analysis is based on information available up to September 18, 2025. For the most comprehensive analysis of KVUE, including Fair Value estimates, real-time financial metrics, and expert insights, explore InvestingPro. Discover why professional investors rely on InvestingPro’s deep-dive research reports, covering 1,400+ top US stocks, to make informed investment decisions.

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