Kenvue’s SWOT analysis: stock faces challenges amid tylenol controversy

Kenvue Inc., 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, has recently faced headwinds that have impacted its stock performance and outlook. This comprehensive analysis examines Kenvue’s current position, recent developments, and future prospects in light of ongoing market dynamics and internal strategic shifts.

Company Overview and Recent Performance

Kenvue operates in three primary segments: Self Care, Skin Health & Beauty, and Essential Health. The company generates over $15 billion in annual revenue, with significant operations across North America, EMEA, APAC, and LATAM. However, recent performance has been challenging, with a 4.2% decline in organic sales year-over-year in Q2 2025. This decline was observed across all segments, with Self Care down 5.9%, Skin Health & Beauty down 3.7%, and Essential Health down 2.4%.

The company’s struggles have led to a downward revision of its 2025 outlook, now expecting low-single-digit declines in organic sales instead of the previously projected 2-4% growth. This shift has prompted Kenvue’s board to review strategic alternatives to enhance shareholder value, alongside leadership changes that include the appointment of Kirk Perry as Interim CEO.

Tylenol Controversy and Market Impact

A significant challenge facing Kenvue is the ongoing controversy surrounding Tylenol, one of its flagship products. Recent reports have suggested 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). This has led to renewed concerns over potential litigation and regulatory scrutiny.

The controversy has had a notable impact on Kenvue’s stock price, with shares dropping by as much as 16% following media reports about the potential link. While the FDA has not found conclusive evidence supporting causality, the situation has created uncertainty among investors and raised questions about the long-term implications for one of Kenvue’s most important brands.

Segment Analysis and Growth Prospects

Despite the challenges in its Self Care segment, which includes Tylenol, Kenvue maintains strengths in other areas of its portfolio. The company has seen increased household penetration for key brands like Zyrtec and improved consumption for Neutrogena Face in the US. However, the Skin Health & Beauty segment has struggled, though there are early signs of recovery in brands like Neutrogena and Aveeno.

Analysts suggest that if Kenvue can improve operations, particularly in the Skin Health & Beauty segment, there could be significant upside potential. Some estimates indicate that the Skin Health & Beauty business, currently valued at approximately $6 per share, could be worth $7-13 per share if it achieves a 20% EBITDA margin and sales increase by 10% from depressed levels.

Strategic Initiatives and Management Focus

In response to recent challenges, Kenvue’s management is focusing on several key strategic initiatives:

1. Simplifying operations and reducing complexity

2. Strengthening leadership across the organization

3. Improving execution and innovation in key product categories

4. Exploring potential strategic alternatives to unlock shareholder value

The company’s new leadership team is expected to review and potentially revamp Kenvue’s operating strategy to enhance innovation and execution across all segments. This strategic shift is crucial for addressing the underperformance in core business segments and responding to activist pressure from investors like Starboard Value, Third Point, and Sachem Head Capital Management.

Financial Analysis and Valuation

Kenvue’s financial position remains solid despite recent challenges. The company maintains a gross profit margin of 58.24% and offers a dividend yield of approximately 4%. Current analyst projections estimate earnings per share (EPS) of $1.04 for 2025, with gradual increases expected through 2029.

From a valuation perspective, Kenvue currently trades at a P/E ratio of 24.78, with a notably low PEG ratio of 0.78, suggesting potential undervaluation relative to its growth prospects. InvestingPro’s Fair Value analysis indicates the stock is currently undervalued, while the company’s financial health score remains FAIR. Some analysts suggest a sum-of-the-parts (SOTP) valuation that indicates significant upside potential based on current operations, with further upside possible if operational improvements are achieved. For deeper insights into Kenvue’s valuation metrics and growth potential, investors can access comprehensive analysis through the Pro Research Report, available exclusively to InvestingPro subscribers.

Bear Case

How might ongoing Tylenol litigation risks impact Kenvue’s financial performance?

The potential litigation risks associated with Tylenol could have significant financial implications for Kenvue. If legal actions are pursued based on the alleged link between acetaminophen and autism/ADHD, the company could face substantial legal costs and potential settlements. This could strain Kenvue’s financial resources and impact its ability to invest in growth initiatives.

Moreover, the controversy could lead to a decline in Tylenol sales, which represent a significant portion of Kenvue’s revenue. Tylenol accounts for approximately 15% of U.S. sales and is likely the company’s largest profit contributor. A substantial decrease in Tylenol consumption could materially affect Kenvue’s overall financial performance and profitability.

Can Kenvue overcome its recent sales declines across all segments?

Kenvue’s recent performance shows declining organic sales across all segments, raising concerns about the company’s ability to return to growth. The revised outlook for 2025, now expecting low-single-digit declines in organic sales, suggests that the challenges are not isolated to a single product or segment.

Overcoming these declines will require successful execution of Kenvue’s strategic initiatives, including operational improvements and innovation across its product portfolio. However, the company faces headwinds such as slower category growth and impacts from tariffs, which could make a quick turnaround challenging. The ability to reverse these trends will be crucial for restoring investor confidence and driving long-term value creation.

Bull Case

How could Kenvue’s new management team drive growth and operational improvements?

Kenvue’s new leadership, including Interim CEO Kirk Perry, brings fresh perspectives and the potential for strategic realignment. The management team’s focus on simplifying operations, reducing complexity, and improving execution could lead to significant cost savings and operational efficiencies. These initiatives may help offset some of the current headwinds and improve profitability.

Furthermore, the emphasis on strengthening leadership and enhancing innovation could revitalize Kenvue’s product pipeline and marketing strategies. If successful, these efforts could drive growth across all segments, particularly in the underperforming Skin Health & Beauty division. The potential for improved performance in this segment alone could unlock substantial value for shareholders.

What potential does Kenvue have for global expansion of key brands like Tylenol?

Despite current challenges, Kenvue’s portfolio of well-known brands presents significant opportunities for global expansion. Tylenol, for instance, is currently a U.S.-centric brand but has considerable potential for international growth. Expanding the reach of such flagship products into new markets could drive revenue growth and diversify Kenvue’s geographic risk profile.

Additionally, the company’s strong position in consumer health and its experience with global brands like Neutrogena and Listerine provides a solid foundation for expanding other products internationally. Successful global expansion could not only boost sales but also enhance Kenvue’s competitive position in the global consumer health market.

SWOT Analysis

Strengths:

• Strong portfolio of well-known consumer health brands
• Market leadership in key product categories
• Solid gross profit margins (58.24%)
• Stable dividend yield (approximately 4%)

Weaknesses:

• Recent declines in organic sales across all segments
• Underperformance in the Skin Health & Beauty segment
• Dependence on U.S. market for major revenue streams
• Ongoing controversy and potential litigation risks associated with Tylenol

Opportunities:

• Potential for operational improvements and cost efficiencies
• Global expansion of key brands, particularly Tylenol
• Innovation in product development and marketing strategies
• Strategic alternatives to unlock shareholder value

Threats:

• Ongoing litigation risks related to Tylenol and acetaminophen
• Competitive pressures in the consumer health market
• Regulatory challenges and potential changes in FDA guidelines
• Macroeconomic factors such as tariffs and slower category growth

Analysts Targets

• J.P. Morgan: Overweight, $21 (October 10, 2025)
• Barclays: Equal Weight, $20 (September 23, 2025)
• Evercore ISI: In Line, $18 (September 23, 2025)
• UBS: Neutral, $23 (September 8, 2025)
• Evercore ISI: In Line, $23 (September 8, 2025)
• BofA Securities: Buy, $25 (September 7, 2025)
• Barclays: Equal Weight, $22 (August 7, 2025)
• Canaccord Genuity: Buy, $29 (May 21, 2025)
• RBC Capital Markets: Sector Perform, $24 (May 9, 2025)
• Piper Sandler: Overweight, $27 (May 5, 2025)

Kenvue Inc . faces a complex set of challenges and opportunities as it navigates its position as a standalone consumer health company. While recent performance has been impacted by controversies surrounding Tylenol and broader market headwinds, the company’s strong brand portfolio and strategic initiatives present potential for future growth. The success of Kenvue’s new management team in executing operational improvements and driving innovation will be crucial in determining the company’s trajectory in the coming years. Investors should closely monitor developments in the Tylenol litigation, progress in the Skin Health & Beauty segment, and the company’s ability to expand globally as key indicators of Kenvue’s long-term prospects.

This analysis is based on information available up to October 13, 2025, and does not include any subsequent developments or market changes.

InvestingPro: Smarter Decisions, Better Returns

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