1. Kenvue Inc. (NYSE:KVUE)
Forward Price-to-Earnings Ratio: 18.83
Market Cap as of October 1: $44.30 billion
Number of Hedge Fund Holders: 58
Kenvue Inc. (NYSE:KVUE) is a consumer health company, formerly the Consumer Healthcare division of Johnson & Johnson. It operates through three segments: the Self Care segment offers cough, cold, and allergy, pain care, digestive health, smoking cessation, and eye care products; the Skin Health and Beauty segment provides face and body care, hair, and sun products; the Essential Health segment offers oral and baby, women’s health, and wound care products.
Self-care growth slowed, but China’s weak market impacted Dr. Ci:Labo. Tylenol performed well with new products and market share gains. Despite increased marketing investments, essential Health and Listerine saw strong organic growth, 7.6% and 10% respectively. The company expanded its in-store presence and increased media, driving overall growth. Allergy sales recovered in June.
Overall, Q2 2024 revenue was down 0.27% year-over-year. Organic growth in Q2 was 1.5%. Value realization contributed 2.1% to growth. Volume declined slightly in Self Care and Skin Health and Beauty, with a 0.6% year-over-year decrease.
The company has strong financials, including $1 billion in cash and equivalents, a 60% gross margin, and a 17.8% operating margin. Management raised full-year sales guidance to a high end of 3% after Q2 results. Consumer staples stocks like this company have held up well during recession fears, and future growth could be fueled by increased beauty spending, positioning it well for future growth.
Oakmark Fund stated the following regarding Kenvue Inc. (NYSE:KVUE) in its first quarter 2024 investor letter:
“Kenvue Inc. (NYSE:KVUE) became the largest standalone consumer health company following its split-off from Johnson & Johnson in May 2023. The company’s highly recognizable brands, such as Neutrogena, Listerine, Tylenol and Band-Aid, have been market share leaders in their respective categories for generations. However, Kenvue’s first year as a public company was clouded by litigation and market share losses in certain categories. As a result, Kenvue now trades for just 16.5x trailing earnings, a substantial discount to the market and other consumer health and packaged goods companies. We see an opportunity for the company to improve efficiency and re-invest the cost savings into increased product development and marketing, which should help improve its growth and brand equity.”
As we acknowledge the growth potential of Kenvue Inc. (NYSE:KVUE), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KVUE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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