With leading science and knowledge, we educate and empower — so that when people need us, they can rely on our brands. However, despite the restructuring in recent years and an in principle solid foundation, I think it is worth keeping an eye on Kenvue’s research and development (R&D) spending in the context of relatively weak long-term sales growth. JNJ’s Consumer Health segment has seen some margin expansion in recent years (Figure 4), but of course there is still room for improvement, especially in terms of cash profitability (estimated free cash flow margin of 17%). Note that I have adjusted the profit figures used in the calculation for litigation-related expenses and gains from divestitures.
- To give its consumer health business the agility to better innovate and grow across its categories, Johnson & Johnson was planning to create two standalone companies.
- The weighted-average interest rate on Kenvue’s long-term debt (94% of total debt) is 5.11%, which I believe is very reasonable in the current environment and considering the rating.
- And, even more fitting, “K” comes after “J” in the English alphabet, a subtle nod to Kenvue as the name of the consumer health sector’s next chapter.
- My regular readers might remember my article from last August, in which I shared my reasons for not participating in the exchange offer and instead sticking with my full position in JNJ stock.
- Kenvue is a compact yet powerful name that stands for the fusion of knowledge and vision.
- Note that I have adjusted the profit figures used in the calculation for litigation-related expenses and gains from divestitures.
Formerly the Consumer Healthcare division of Johnson & Johnson,[2] Kenvue is the proprietor of well-known brands such as Aveeno,[3] Band-Aid,[4] Benadryl, Zyrtec,[5] Johnson’s,[6] Listerine,[7] Mylanta, Neutrogena,[3] Tylenol,[7] and Visine. To give its consumer health business the agility to better innovate and grow across its categories, Johnson & Johnson was planning to create two standalone companies. The other needed a new corporate name—one that would build on its rich history of innovation and consumer focus, while providing the scalability to evolve boldly into the future.
So it will be interesting to hear what management has to say about the long-term strategy to return to stronger growth. The weighted-average interest rate on Kenvue’s long-term debt (94% of total debt) is 5.11%, which I believe is very reasonable in the current environment and https://www.day-trading.info/ considering the rating. The maturity profile of Kenvue’s long-term debt is shown in Figure 7 and compared to the company’s free cash flow after dividends over three years, assuming no growth. We can see that Kenvue could repay the debt at maturity and not need to refinance.
We’ve always believed in the power of new perspectives and insights to drive innovation. That’s why our iconic brands have helped generations take care of themselves https://www.topforexnews.org/ and their loved ones for more than 135 years. Our Healthy Lives Mission strives to advance the well-being of both your health and the planet’s health.
Kenvue innovations: 2 new products help with pain relief, facial cleansing
Then, with an eye towards global growth, we created the brand’s Chinese name, which successfully achieved phonetic similarity with the English name. Thibaut Mongon, J&J’s executive vice president and worldwide chair of consumer health, will serve as CEO of the newly public company. The company’s self-care unit, which includes products for eye care, cough and cold, and vitamins, generated $6 billion in net sales for 2022, accounting for 40% of total revenue.
J&J will generally be able to control matters that shareholders vote on, such as the election of directors to Kenvue’s board, the filing said. The spinoff, the biggest IPO since EV maker Rivian went public in November https://www.forexbox.info/ 2021, alone may not completely turn around the moribund IPO market, which plummeted in 2022. Whether you agree or disagree with my conclusions, I always welcome your opinion and feedback in the comments below.
Thibaut Mongon
The interest coverage ratio is approximately 7.8 times the expected free cash flow before interest payments, although it should be noted that this figure does not include interest income for reasons of prudence (KVUE had cash and cash equivalents of $1.1 billion at the end of the third quarter). For its first year as a standalone company, analysts currently expect EPS of $1.26 and net sales of $15.6 billion. If we use JNJ’s former Consumer Health segment for comparison – for which net sales data is readily available in JNJ’s 10-Ks – we see that analysts expect sales growth of 4.1% for 2023.
Paul Ruh, J&J’s chief financial officer of consumer health and a former PepsiCo executive, will serve as CFO, and Meredith Stevens, J&J’s worldwide vice president of the company’s consumer health supply chain department, will serve as COO. However, the potential underinvestment should not necessarily be interpreted as a sign of poor profitability or a weak balance sheet (i.e., a need to cut costs). The company could most certainly repay all of its debt on maturity and would not even have to suspend its dividend.
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In May 2023, Kenvue made our debut as a public company on the New York Stock Exchange, trading under the KVUE ticker symbol. Today, Kenvue is the world’s largest pure-play consumer health company by revenue, with annual sales of ~$15 billion in 2022. If you’ve heard of Kenvue, you may already know that we’re a global consumer health company.
We care fiercely
But beyond our portfolio of iconic brands, Kenvue is built on a foundation of core values, which fuel our 22,000+ global team members every day. Of course, given Kenvue’s very limited history, it is impossible to say whether estimates are likely to be beaten. However, considering that CEO Mongon has been with the parent company for 23 years and has led the former Consumer Health segment since 2019, I view JNJ’s tradition of at least meeting estimates as a reasonable expectation for Kenvue. In addition, its recession-resistant business model and low demand volatility contribute their fair share to what I believe could become a “sleep well at night” company.
Kenvuers in action: Giving back and creating change
At the same time, however, it may turn out that the split-off from parent company Johnson & Johnson is the best thing that could have happened to the newly formed company. J&J faces thousands of allegations that its talc baby powder and other talc products caused cancer. As shown in Figure 6, Kenvue’s R&D spending is declining in relative terms – and this obviously cannot be attributed to disproportionately strong sales growth. Although Kenvue still spends a similar percentage of net sales on R&D as comparable peers, the decline is still somewhat worrying.
J&J will control 91.9% of Kenvue after the IPO — or 90.8% if underwriters exercise their options to purchase additional shares, according to the prospectus filing. Proceeds from the offering and any profits from related debt-financing transactions will go to J&J, but Kenvue will retain $1.17 billion in cash and cash equivalents. The temporary hold will give J&J time to try to win court approval of its $8.9 billion proposed settlement with plaintiffs in the talc cases. A federal bankruptcy judge in April temporarily halted nearly 40,000 talc lawsuits through mid-June. That decision was part of J&J’s second attempt to settle talc claims in bankruptcy proceedings. Kenvue noted that its global footprint is “well balanced geographically,” with roughly half of 2022 net sales coming from outside North America.
The figure for the period from January to September 2023 is very low, but it could be that R&D spending is weighted towards the end of this year. In any case, investors and those interested in investing in KVUE stock should keep an eye on this figure as it could indicate a lack of innovation. However, at the same time, an increase in the coming years could indicate underinvestment when Kenvue was still part of JNJ, and would thus suggest an improvement as the company can now freely allocate its resources.