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KENVUE'S NOT-SO-SMOOTH SAILING COURSE COULD CHANGE, CANACCORD GENUITY SAYS

Consumer health company Kenvue's KVUE.N could boost its overall performance and unlock significant value for investors if it sells or spins off its struggling skin health and beauty segment, according to Canaccord Genuity analysts. "It has not been smooth sailing for the company," since it became independently listed in 2023, analysts said. Since then, Kenvue has dealt with softening demand in key markets, to prior underinvestment by J&J in key brands driving weaker sales, activist investor involvement and new additions to its board.The company's skin health and beauty business, which houses its Neutrogena and Aveeno brands, has had lackluster performance. First-quarter sales at its skin health unit fell 7.3% to $977 million, below analysts' estimate of $1.09 billion."This leads to the question: Does it make sense to separate KVUE to unlock value?" Canaccord analysts said in a note.The brokerage said that after analyzing potential scenarios, "if anything is sold or spun out, it would likely be the beaten-down skin health and beauty business." If split up, Kenvue could theoretically be valued at $32 per share, with $18 in value coming from the self care business- which sells cough and cold products, $8 from essential health, and $6 from skin health and beauty, according to the brokerage's estimates. (KVUE shares are last trading down about 0.2% at $24.09).

Data for some key brands for the first quarter shows that the skin health and beauty business is showing early signs of recovery - and management's initiatives such as increased marketing investments could be bearing fruit, analysts said.

The business could be worth as much as $13 per share, compared to the brokerage's current estimate of $6 per share, if recovery occurs.

(Sneha S K)

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