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Investing.com -- S&P Global Ratings revised its outlook on Kenvue Inc . (NYSE:KVUE) to negative from stable on Thursday, while affirming the company’s ’A’ rating.
The outlook change follows Kenvue’s announcement that its board has initiated a comprehensive strategic review to unlock shareholder value through various alternatives, including brand portfolio optimization and improved execution.
The consumer health company also disclosed its CEO’s departure, following its CFO replacement earlier this year, and appointed an interim chief executive. Preliminary second-quarter 2025 results show net sales falling approximately 4%, worse than S&P’s expected 1% decline.
S&P noted that Kenvue’s performance since separating from Johnson & Johnson (NYSE:JNJ) has fallen short of expectations. Revenue has remained flat over the past 24 months, compared to projected mid-single-digit growth. The company’s adjusted leverage reached 2.3x for the 12 months ended March 30, 2025, higher than S&P’s expectation of slightly below 2x.
The underperformance has attracted activist investors highlighting Kenvue’s equity valuation gap compared to peers, with some calling for a company sale or asset disposals.
S&P indicated it could lower Kenvue’s rating if the strategic review results in reduced scale or diversification, if a new restructuring program further depresses adjusted EBITDA, or if the company adopts more aggressive financial policies.
The rating agency could revise the outlook back to stable if performance stabilizes and the strategic review enhances Kenvue’s profit margin profile while maintaining a strong brand portfolio and keeping adjusted leverage no higher than the low-2x area.
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