kenvue investment thesis

Johnson & Johnson's Q4 Earnings: Spotlight On Dividend Security Following Kenvue Split, Legal Costs, Acquisitions

Johnson & Johnson (NYSE:JNJ), will be reporting its fourth-quarter earnings on Tuesday. Wall Street is expecting the company to report $2.28 in EPS and $20.99 billion in revenue, as it reports before market hours .

With a market cap of over $389 billion, Johnson & Johnson is one of the world’s most valuable companies. It is one of only two U.S.-based companies that has a prime credit rating of AAA. The other is Microsoft (NASDAQ:MSFT). The company is exclusively focused on developing and producing pharmaceutical prescription drugs and medical device technologies. As a 130-year-old surgical dressing and baby products company, its most popular products include Band-Aids, Tylenol and Johnson’s Baby Powder.

Here's what analysts will be focusing on, and how the stock currently maps against Wall Street estimates.

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Johnson & Johnson Investment Thesis

Johnson & Johnson stands as a historically reliable investment option. Its commitment to shareholder value through dividends and rock-solid balance sheet make it a staple in diverse portfolios.

In 2023, the company split-off of its Consumer Health segment, resulting in the creation of Kenvue Inc (NYSE:KVUE) stock. The $700 million settlement for ongoing litigation about its talc-based baby powders, has impacted the company’s financials and consumer confidence. However, this settlement is viewed as a strategic move to proactively manage future costs and minimize long-term damage.

Johnson & Johnson’s strength lies in its well-diversified Innovative Medicine and MedTech segments. Innovative Medicine focuses on immunology (Stelara and Tremfya) and oncology drugs (Darzalex), while MedTech specializes in surgical devices and orthopaedics.

The acquisition of Abiomed, Inc. for $16.6 billion at the end of 2022 enhanced the company’s position in coronary artery disease and heart failure treatment. Johnson & Johnson has also announced its $2 billion  acquisition  of Ambrx Biopharma Inc (NASDAQ:AMAM). This acquisition represents its expansion into targeted cancer therapies.

The company has been paying and growing dividends for 61 years. Despite the Kenvue split-off and ongoing talc litigation, the safety of JNJ’s dividend appears to remain intact.

Related: J&J’s Tentative $700M Agreement To Resolve Talc Powder-Related Lawsuits Across US States

Q4 Analyst Focus & Consensus Ratings

Q4 Analysts' Focus:  Analysts will be assessing Johnson & Johnson’s dividend safety pursuant to the Kenvue split-off. The impact of talc lawsuit settlement and the acquisition of Ambrx Biopharma, would also be in focus.

Ratings & Consensus Estimates:   The consensus analyst rating on Johnson & Johnson stock currently stands at Neutral, and the consensus price target is $175.75 a share.

JNJ Price Action: On Friday, shares of Johnson & Johnson ended the trading day 0.29% higher, closing at $161.68.

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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

This article Johnson & Johnson's Q4 Earnings: Spotlight On Dividend Security Following Kenvue Split, Legal Costs, Acquisitions originally appeared on Benzinga.com .

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Kenvue: New Business, Optimized Portfolio, and Decades of Market Leadership Carve Out a Wide Moat

We are initiating coverage of Kenvue KVUE with a fair value estimate of $27.50 per share and a wide moat rating thanks to its brand reputation (intangible assets) and an entrenched standing with retailers and low consumer acquisition costs (cost advantage). Formerly known as Johnson & Johnson’s consumer segment, Kenvue is the world’s largest pure-play consumer health company by revenue, generating $15 billion in annual sales. Our forecast is underpinned by a five-year CAGR of sales of 4.2% and an annual margin expansion with operating margin reaching slightly over 20% by 2027.

Results from the first quarter show Kenvue’s three segments posting high-single-digit sales growth solely from pricing, and we expect a similar trend for the remainder of the year, albeit the impact might slow as the year progresses. For 2024 onward, we expect pricing tailwinds to significantly come down and normalize to provide a low-single-digit contribution to sales growth. Macro trends such as an aging population and a premiumization of consumer healthcare products should provide tailwinds for Kenvue’s wide array of brands. We also expect Kenvue to benefit from an increasing digital investment (71% of company’s marketing spend in 2022 was digital versus 44% in 2019) as e-commerce sales continue to rise faster than in-person store sales.

We forecast an annual margin improvement for Kenvue driven by continued improvements in its supply chain and an increased efficiency in operation. Kenvue has been rationalizing its portfolio through a reduction in a number of stock keeping units and business selloffs (15 divestitures from 2016 to 2022) and now that most of this optimization is behind us, we expect a more agile product catalogue. We also expect cost savings from supply chain optimization initiatives as Kenvue dedicates roughly 60% of capital expenditures to automation and digitalization of its manufacturing and distribution network, improving end-to-end integration.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies .

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About the author, keonhee kim.

Keonhee Kim is an equity analyst for Morningstar Research Services, a wholly owned subsidiary of Morningstar, Inc., covering healthcare technology, distribution and device firms.

Before joining Morningstar in 2020, Kim interned at Bank of America to learn about its consumer banking and advisory divisions.

Kim holds a bachelor's degree in applied mathematics with a concentration in economics from the University of California, Berkeley. He is a Level I candidate in the Chartered Financial Analyst® program.

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Johnson & Johnson Announces Final Results of Exchange Offer and Finalizes Separation of Kenvue Inc.

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NEW BRUNSWICK, N.J., August 23, 2023 – Johnson & Johnson (NYSE: JNJ) today announced the final results of its previously announced offer to its shareholders to exchange their shares of Johnson & Johnson common stock for shares of Kenvue Inc. (NYSE: KVUE) (“Kenvue”) common stock owned by Johnson & Johnson. The exchange offer expired at 12:00 midnight, New York City time, at the end of the day on August 18, 2023.

Pursuant to the exchange offer, Johnson & Johnson has accepted 190,955,436 shares of Johnson & Johnson common stock in exchange for 1,533,830,450 shares of Kenvue common stock.

Because the exchange offer was oversubscribed, Johnson & Johnson accepted only a portion of the shares of its common stock that were validly tendered and not validly withdrawn, on a pro rata basis in proportion to the number of shares tendered. Shareholders who owned fewer than 100 shares of Johnson & Johnson common stock, or an “odd-lot,” who validly tendered all of their shares, were not subject to proration, in accordance with the terms of the exchange offer. All shares validly tendered by eligible “odd-lot” shareholders were accepted. The final proration factor of 23.231832% was applied to all other validly tendered shares of Johnson & Johnson common stock to determine the number of such shares that were accepted. Following completion of the exchange offer, Johnson & Johnson retains approximately 9.5% of the outstanding shares of Kenvue common stock.

“Johnson & Johnson’s exclusive focus on transformational Pharmaceutical and MedTech solutions enables us to innovate across the full spectrum of healthcare in ways that no other company can,” said Joaquin Duato, Chairman and Chief Executive Officer of Johnson & Johnson. “We are proud of the hard work that has led us to this historic milestone which brings significant value to shareholders and positions Johnson & Johnson to be even more agile, focused and competitive.”

Based on the final count by the exchange agent, Computershare Trust Company, N.A., the final results of the exchange offer are as follows:

• Total number of shares of Johnson & Johnson common stock validly tendered and not validly withdrawn: 800,449,685
• Shares tendered that were subject to proration: 793,920,159
• “Odd-lot” shares tendered that were not subject to proration: 6,529,526
• Total number of shares of Johnson & Johnson common stock accepted: 190,955,436

Shares of Johnson & Johnson common stock tendered but not accepted for exchange will be returned to the tendering shareholders in book-entry form promptly. In addition, the exchange agent will promptly credit shares of Kenvue common stock for distribution in the exchange offer in book-entry form to accounts maintained by the Kenvue transfer agent for tendering shareholders whose shares of Johnson & Johnson common stock were accepted in the exchange offer. Checks in lieu of fractional shares of Kenvue common stock will be delivered after the exchange agent has aggregated all fractional shares and sold them in the open market.

Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC served as dealer managers for the exchange offer.

Johnson & Johnson to Provide Post-Separation Financials As previously communicated, Johnson & Johnson will provide updated financials and 2023 guidance that will reflect operations as a two-sector company dedicated to Pharmaceutical and MedTech innovation, as well as its updated outstanding share count. The Company will provide this updated financial information via press release which will be available for investors at approximately 6:45 a.m. (Eastern Time) on Wednesday, August 30, 2023.

About Johnson & Johnson At Johnson & Johnson, we believe good health is the foundation of vibrant lives, thriving communities and forward progress. That’s why for more than 135 years, we have aimed to keep people well at every age and every stage of life. Today, as the world’s largest, most diversified healthcare products company, we are committed to using our reach and size for good. We strive to improve access and affordability, create healthier communities, and put a healthy mind, body and environment within reach of everyone, everywhere. We are blending our heart, science and ingenuity to profoundly change the trajectory of health for humanity.

Forward Looking Statements This communication contains certain statements about Johnson & Johnson and Kenvue that are forward-looking statements. Forward-looking statements are based on current expectations and assumptions regarding Johnson & Johnson’s and Kenvue’s respective businesses, the economy and other future conditions. In addition, the forward-looking statements contained in this communication may include statements about the expected effects on Johnson & Johnson and Kenvue of the exchange offer, the anticipated timing and benefits of the exchange offer, Johnson & Johnson’s and Kenvue’s anticipated financial results, and all other statements in this communication that are not historical facts.

Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and are detailed more fully in Johnson & Johnson’s and Kenvue’s respective periodic reports filed from time to time with the Securities and Exchange Commission (the “SEC”), the Registration Statement referred to below, including the Prospectus forming a part thereof, the Schedule TO and other exchange offer documents filed by Johnson & Johnson or Kenvue, as applicable, with the SEC. Such uncertainties, risks and changes in circumstances could cause actual results to differ materially from those expressed or implied in such forward-looking statements. Forward-looking statements included herein are made as of the date hereof, and neither Johnson & Johnson nor Kenvue undertakes any obligation to update publicly such statements to reflect subsequent events or circumstances, except to the extent required by applicable securities laws. Investors should not put undue reliance on forward-looking statements.

Additional Information and Where to Find It This communication is for informational purposes only and is not an offer to sell or exchange, a solicitation of an offer to buy or exchange any securities and a recommendation as to whether investors should participate in the exchange offer. Kenvue has filed with the SEC a registration statement on Form S-4 (the “Registration Statement”), including the Prospectus forming a part thereof, and Johnson & Johnson has filed with the SEC a Schedule TO, which more fully describes the terms and conditions of the exchange offer. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROSPECTUS, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, WHEN THEY BECOME AVAILABLE AND BEFORE MAKING ANY INVESTMENT DECISION, BECAUSE THEY CONTAIN IMPORTANT INFORMATION. None of Johnson & Johnson, Kenvue or any of their respective directors or officers or the dealer managers appointed with respect to the exchange offer makes any recommendation as to whether you should participate in the exchange offer.

Holders of Johnson & Johnson common stock may obtain copies of the Prospectus, the Registration Statement, the Schedule TO and other related documents, and any other information that Johnson & Johnson and Kenvue file electronically with the SEC free of charge at the SEC’s website at http://www.sec.gov . Holders of Johnson & Johnson common stock will also be able to obtain a copy of the Prospectus by clicking on the appropriate link on http://www.JNJSeparation.com .

Johnson & Johnson has retained Georgeson LLC as the information agent for the exchange offer. To obtain copies of the exchange offer Prospectus and related documents, or for questions about the terms of the exchange offer, you may contact the information agent at 1-866-695-6074 (toll-free for stockholders, banks and brokers) or +1-781-575-2137 (all others outside the United States).

Investor Relations: Jessica Moore [email protected]

Media Relations: Jake Sargent [email protected]

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Kenvue inc (kvue) q1 2024 earnings: aligns with analyst eps projections amidst strategic ....

Revenue: Reached $3.9 billion, up 1.1% year-over-year, slightly surpassing the estimated $3.789 billion.

Net Income: Reported at $296 million, falling short of the estimated $488.67 million.

Earnings Per Share (EPS): Diluted EPS was $0.15, below the estimated $0.26; however, adjusted diluted EPS was $0.28, slightly surpassing the estimate.

Gross Profit Margin: Improved to 57.6% from 55.2% a year ago, with an adjusted gross profit margin of 60.2%.

Operating Income Margin: Decreased to 14.1% from 16.6% in the previous year, affected by a $68 million impairment charge and restructuring expenses.

Effective Tax Rate: Increased to 30.7% from 23.0% last year, influenced by jurisdictional mix of earnings and other factors.

2024 Outlook: Reaffirms full-year adjusted EPS to be in the range of $1.10 to $1.20 and expects net sales growth between 1.0% to 3.0%.

Warning! GuruFocus has detected 3 Warning Sign with KVUE.

Kenvue Inc ( NYSE:KVUE ), the world's largest pure-play consumer health company, disclosed its financial results for the first quarter ended March 31, 2024, through its 8-K filing on May 7, 2024. The company reported a net sales increase of 1.1% to $3.9 billion, with organic growth of 1.9%. Despite a challenging environment, Kenvue's adjusted diluted earnings per share stood at $0.28, aligning closely with analyst expectations of $0.26 per share.

Company Overview

Kenvue Inc, formerly part of Johnson & Johnson's consumer segment, became an independent entity in May 2023. It operates across various consumer health areas including pain management, oral care, and skin health, boasting renowned brands such as Tylenol, Listerine, and Neutrogena. The company's strategic focus is on reaching more consumers and enhancing brand investments, amidst a fragmented and highly competitive industry.

Financial Highlights and Challenges

The first quarter saw Kenvue achieving a gross profit margin of 57.6%, an improvement from the previous year, driven by value realization and efficient global supply chain initiatives. However, operating income margin declined to 14.1% due to a $68 million impairment charge and restructuring costs. The company also reported a net income of $296 million, down from $469 million in the prior year, reflecting the ongoing costs of becoming a standalone public entity and other strategic investments.

Strategic Initiatives and Future Outlook

Kenvue is undergoing significant transformation initiatives aimed at reducing its global workforce by approximately 4% and achieving annualized pre-tax gross cost savings of around $350 million by 2026. These measures are part of 'Our Vue Forward' strategy, which focuses on enhancing organizational efficiencies and positioning the company for sustainable growth. For the full year 2024, Kenvue anticipates adjusted diluted earnings per share to be between $1.10 and $1.20, reflecting the ongoing impact of public company costs and foreign currency headwinds.

Analysis and Industry Context

The alignment of Kenvue's Q1 earnings with analyst projections underscores the company's resilience in navigating post-spin-off challenges and investing in brand strength. The strategic cost management and efficiency improvements are crucial as Kenvue aims to cement its leadership in the consumer health sector. However, the competitive landscape and economic pressures necessitate continued innovation and market adaptation.

Kenvue's reaffirmation of its 2024 outlook suggests confidence in its strategic plans despite external headwinds. The focus on organic growth and margin improvements, coupled with strategic restructuring, positions Kenvue to leverage its strong brand portfolio for long-term shareholder value.

As Kenvue continues to evolve in its first year as an independent company, its performance in Q1 2024 reflects both the challenges and opportunities inherent in the consumer health industry. Investors and stakeholders will likely watch closely how the company's strategic initiatives unfold in the coming quarters, impacting its financial health and market position.

Explore the complete 8-K earnings release ( here ) from Kenvue Inc for further details.

This article first appeared on GuruFocus .

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Class Action Lawsuit Filed Against Kenvue Inc. (NYSE: KVUE)

Kenvue Inc. KVUE is down over 25% from its debut earlier this year in May 2023. Formed from the separation of Johnson & Johnson’s Consumer Health business, the company was billed as the world’s largest pure-play consumer health company with annual revenues of over $15 billion from brands such as Tylenol, Neutrogena, Listerine, Aveeno, and Nicorette. While for many the investment thesis has yet to pan out, investors with losses stand to benefit from recent class action litigation seeking to recover investment losses.

In November 2021, Johnson & Johnson announced its plan to spin-off its Consumer Health business. Eighteen months later, Kevnue completed its initial public offering and began trading on the New York Stock Exchange under the ticker symbol “KVUE”. The initial public offering generated net proceeds of $4.2 billion and resulted in over 1.9 billion publicly-listed Kenvue shares. Johnson & Johnson, however, retained ownership of approximately 90% of those shares for several months. In August 2023, Johnson & Johnson released the shares to its shareholders through an exchange offer. 

Kenvue’s initial public offering was underwritten by the largest banks on Wall Street, including the likes of Goldman Sachs, J.P. Morgan, Deutsche Bank, Citigroup, UBS, and so on. Analysts at many of these firms initiated coverage with enthusiasm. J.P. Morgan, for example, initiated at “overweight” with a price target of $29/share ( i.e. , $7/share over the $22/share initial public offering price). Their support for the stock was based primarily on an investment thesis that included top-line growth, expanding margins, strong cash flow, and experienced management. 

Absent from the fanfare was any discussion of phenylephrine and the risks it posed to Kenvue in terms of adverse regulatory action. Phenylephrine is an active ingredient in many over-the-counter decongestant medications. Kenvue uses phenylephrine in a number of its products, including Sudafed PE, Benadryl Allergy Plus Congestion, and Tylenol Sinus + Headache. On September 12, 2023, the Nonprescription Drugs Advisory Committee of the U.S. Food and Drug Administration voted unanimously that phenylephrine was ineffective as a nasal decongestant when taken orally. This finding could result in the removal of several of Kenvue’s products from store shelves and, in turn, a substantial loss of revenue they would have otherwise generated for the company and its shareholders.

News of the FDA’s decision prompted an immediate sell-off in Kenvue shares adding to downward pressure already in the market from ongoing acetaminophen litigation. Investors who suffered investment losses because of the announcement are questioning why management did not provide more information in Kenvue’s initial public offering documents about the risks its reliance on phenylephrine had on company revenues. While the FDA has been evaluating the efficacy of phenylephrine for some years, Johnson & Johnson and Kenvue said nothing of it in the registration statement or prospectus they used to take the company public. 

Kenvue now faces class action litigation for alleged violations of the federal securities laws. The class action complaint alleges that Kenvue and its management neglected to disclose material information concerning the risks arising from phenylephrine and the potential for adverse regulatory action. If the lawsuit is successful, investors could recover investment losses they incurred from their Kenvue shares. For those that paid top-dollar for the stock during the initial public offering, recovering these losses would undoubtedly improve their overall position given where the stock currently trades. 

Kenvue shareholders that suffered losses are encouraged to learn more about how the class action lawsuit may benefit them and whether to seek to become a lead plaintiff representing the class of Kenvue shareholders.   

Featured image sourced from Shutterstock

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This contains sponsored content and is for informational purposes only and not intended to be investing advice.

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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