BofA Securities renewed analyst coverage of Kenvue Inc (NYSE: KVUE) on Tuesday but withheld a formal rating, pointing to the company’s pending acquisition by Kimberly-Clark as the reason for suspending a recommendation. Kenvue currently carries a market capitalization of $35.27 billion and has been trading just below InvestingPro’s Fair Value estimate.
The consumer health company posted fourth-quarter organic sales growth of 1.2%. That expansion was supported by a 2.3% gain from price and mix, which was partly offset by a 1.1% decline in volumes. Volume headwinds were concentrated in self care, down 3.1%, while skin health and beauty volumes fell 0.8%.
Despite the volume weakness, Kenvue’s gross profit performance remained strong. InvestingPro data shows reported gross profit margins at 58.13%. On an adjusted basis, gross profit margin widened by 10 basis points year-over-year to 58.8%, with productivity improvements cited as offsetting inflationary pressures, tariffs and transaction foreign exchange headwinds.
Adjusted earnings per share for the quarter came in at $0.27. The company attributed the EPS outcome to improved margins and a favorable tax rate driven by geographic mix. InvestingPro data also indicates Kenvue carries a moderate level of debt and has raised its dividend for three consecutive years, with the current yield at 4.51%.
BofA Securities analyst Anna Lizzul noted that the stock’s price action is not being set by fundamentals following the November 3 announcement of Kimberly-Clark’s acquisition. That observation is consistent with a valuation metric highlighted in InvestingPro research: a price-to-earnings ratio of 24.82 alongside a strong three-month return.
Kenvue’s segment performance was mixed. Self care faced pressure from lower-than-normal seasonal incidences of cold, cough and flu in the United States, while skin health and beauty volumes also declined. Conversely, Essential Health delivered stronger results driven by improvements in baby care and oral care outside the U.S., with both price and volume contributing positively.
On the revenue front, Kenvue reported quarterly sales of $3.78 billion, which missed the consensus forecast of $4.11 billion. Nevertheless, reported revenue represented a 3.2% increase compared with the same period a year earlier. The company’s fourth-quarter results did not meet analyst expectations on both top- and bottom-line measures.
These operating and financial developments come as Kenvue proceeds through the acquisition process by Kimberly-Clark, a factor BofA points to when explaining the suspension of a formal rating. The firm’s messaging suggests that takeover-related dynamics are dominating market valuation and trading behavior rather than ongoing operating fundamentals.
Summary
BofA resumed coverage of Kenvue without a rating because the pending Kimberly-Clark acquisition appears to be the primary driver of the stock’s market value. Kenvue reported modest organic sales growth, margin resilience and an EPS of $0.27, but missed consensus revenue and EPS estimates for the quarter.
Key points
- Kenvue logged 1.2% organic sales growth in the fourth quarter, with price and mix up 2.3% and volumes down 1.1%.
- Adjusted gross margin expanded 10 basis points to 58.8%, reflecting productivity gains that offset inflationary, tariff and FX transaction pressures.
- Quarterly revenue was $3.78 billion and adjusted EPS was $0.27, both below analyst consensus; company revenue rose 3.2% year-over-year.
Risks and uncertainties
- Takeover dynamics: The pending acquisition by Kimberly-Clark is influencing Kenvue’s trading and valuation, which may decouple the share price from current operating fundamentals.
- Volume weakness and seasonal dynamics: Lower seasonal incidences of cold, cough and flu in the U.S. contributed to declines in self care volumes, which could continue to pressure sales in that segment.
- Retail inventory reductions: Reductions in retail customer inventories were cited as a headwind, creating uncertainty for near-term revenue flows.
Conclusion
Kenvue shows resilient margin metrics and modest organic growth amid mixed segment performance, but the stock’s valuation and recent price moves are being shaped by acquisition activity rather than pure operating results, according to BofA. Investors and market participants face uncertainty as the acquisition process progresses and as seasonal and inventory dynamics affect near-term volumes and revenue.