Kenvue Inc. (KVUE) Q2 2024 Earnings: EPS of $0.03, Adjusted EPS of $0.32 Beats Estimates, Revenue of $4.0 Billion Exceeds Expectations

Net Sales Decrease 0.3%, Adjusted EPS Exceeds Expectations

Summary
  • Net Sales: $4.0 billion, a slight decrease of 0.3% year-over-year, exceeding the estimated $3.94 billion.
  • GAAP EPS: $0.03, a significant decline from $0.23 in the prior year period.
  • Gross Profit Margin: Expanded by 360 basis points to 59.1%, reflecting productivity gains and supply chain efficiency initiatives.
  • Operating Income Margin: Dropped to 3.9% from 17.5% in the prior year, impacted by asset impairment charges and increased brand investment.
  • Interest Expense: $92 million, contributing to a lower net income compared to the previous year.
  • Effective Tax Rate: Reduced to 10.8% from 32.7% in the prior year, driven by the reversal of a deferred tax liability.
  • 2024 Outlook: Reaffirmed net sales growth of 1.0%-3.0% and adjusted diluted EPS in the range of $1.10-$1.20.
Article's Main Image

On August 6, 2024, Kenvue Inc (KVUE, Financial) released its 8-K filing for the second quarter of 2024. Kenvue, the world's largest pure-play consumer health company by sales, reported net sales of $4.0 billion, a slight decrease of 0.3% compared to the same period last year. Despite this, the company achieved an adjusted diluted earnings per share (EPS) of $0.32, surpassing the analyst estimate of $0.25.

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Company Overview

Kenvue Inc (KVUE, Financial), formerly Johnson & Johnson's consumer segment, spun off and went public in May 2023. The company operates in various consumer health sectors, including cough, cold and allergy care, pain management, face and body care, oral care, and women's health. Its portfolio boasts well-known brands such as Tylenol, Listerine, Johnson's, Aveeno, and Neutrogena. Despite intense competition and changing consumer preferences, many of Kenvue's brands lead their respective segments globally.

Performance and Challenges

Kenvue's net sales for Q2 2024 were $4.0 billion, a 0.3% decrease from the previous year. Organic growth was 1.5%, driven by a 2.1% increase in value realization (price and mix) but offset by a 0.6% decline in volume. The slight volume declines were primarily in Skin Health and Beauty and Self Care, partially offset by growth in Essential Health.

The company's gross profit margin expanded by 360 basis points to 59.1%, reflecting productivity gains from global supply chain efficiency initiatives and value realization. However, operating income margin dropped to 3.9% from 17.5% due to charges related to Dr.Ci:Labo® asset impairment, brand investment, and restructuring charges.

Financial Achievements

Kenvue's adjusted diluted EPS of $0.32 exceeded the analyst estimate of $0.25, indicating strong profitability despite challenges. The company's gross profit margin improvement to 59.1% from 55.5% in the prior year highlights its operational efficiency. Additionally, the adjusted operating income margin was 22.8%, slightly down from 23.1% in the previous year, due to increased brand investment.

Key Financial Metrics

Key details from Kenvue's financial statements include:

Metric Q2 2024 Q2 2023
Net Sales $4.0 billion $4.011 billion
Gross Profit $2.365 billion $2.225 billion
Operating Income $154 million $702 million
Net Income $58 million $430 million
Diluted EPS $0.03 $0.23
Adjusted Diluted EPS $0.32 $0.31

Analysis and Outlook

Kenvue's performance in Q2 2024 reflects its ability to navigate a challenging market environment. The company's focus on productivity gains and brand investment positions it well for future growth. The reaffirmation of its FY24 outlook, including net sales growth of 1.0%-3.0% and adjusted diluted EPS of $1.10-$1.20, underscores management's confidence in achieving its financial targets.

Despite the challenges, Kenvue's strong brand portfolio and operational efficiency provide a solid foundation for long-term value creation. Investors should monitor the company's ability to sustain organic growth and manage costs effectively in the coming quarters.

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