Kenvue Inc.
KVUE · NYSE
Next quarter
Reports Nov 2, 2026.
Consensus is $0.28 EPS for Sep 2026 across 4 estimates, ranging $0.26 to $0.32.
KVUE Jun 2026
- 3.12%
- $0.32
- $0.31
- —
- $3.96B
Reported results
- $3.96B
- 58.18%
- $699.00M
- 17.67%
- $456.00M
- $0.24
Highlights
- Sales growth: Net sales rose 3.0% year over year to $3.955 billion, including 1.6% organic growth and a 1.4% foreign-currency benefit; organic growth reflected 0.9% value realization and 0.7% volume growth.
- Earnings: Adjusted diluted EPS increased 7% to $0.31 from $0.29, but was $0.01 below the $0.32 consensus estimate; GAAP diluted EPS rose to $0.24 from $0.22.
- Broad-based segments: Skin Health and Beauty led with 5.1% reported sales growth and 3.7% organic growth, while Self Care grew 2.2% reported and Essential Health 2.3%; all three segments posted organic growth.
- Margin pressure: Adjusted operating margin declined to 22.1% from 22.7%, as inflation, tariffs, unfavorable transactional foreign exchange and higher brand support costs outweighed productivity savings.
- Skin Health profitability: Skin Health and Beauty adjusted operating income increased 24.8% to $186 million, while Self Care declined 2.8% to $512 million and Essential Health fell 10.3% to $315 million.
- Tax benefit: The effective tax rate fell to 23.7% from 28.6%, helped by a valuation-allowance release, favorable earnings mix and tax-law changes; this supported net income growth of 8.6% to $456 million.
- Cash generation: First-half operating cash flow increased to $1.177 billion from $1.049 billion, and free cash flow rose to $1.0 billion from $0.8 billion after $203 million of capital expenditures.
- Kimberly-Clark transaction: The merger remains expected to close in the fourth quarter of 2026, subject to foreign regulatory approvals; Kenvue is providing no forward guidance and held no conference call.
- Product launch: The FDA approved Tylenol with Naproxen, a fixed-dose OTC combination with a three-year exclusivity period that Kenvue expects to begin selling soon at major U.S. retailers.
Analysis
Kenvue’s second quarter was a modest sales-growth print with mixed underlying quality. Net sales of $3.955 billion increased 3.0% from $3.839 billion a year ago and rose from $3.91 billion in the first quarter. Organic growth of 1.6% was split between 0.9% value realization and 0.7% volume, with growth across every segment and region. Adjusted diluted EPS was $0.31, up from $0.29 a year ago but below the $0.32 consensus estimate by 3.1%. GAAP diluted EPS was $0.24 versus $0.22 last year and $0.25 in the prior quarter, while operating income increased 1.0% year over year to $699 million but declined from $767 million sequentially.
The defining feature was a divergence between the segments. Skin Health and Beauty delivered the strongest combination of growth and profitability, aided by e-commerce, innovation and improved brand support efficiency. Self Care returned to U.S. organic growth, but its adjusted profit declined, while Essential Health’s volume gains were offset by price investment, cost inflation and tariffs. Consolidated adjusted operating margin fell 60 basis points to 22.1%. Lower taxes helped lift net income 8.6% to $456 million. Meanwhile, the pending Kimberly-Clark combination dominates the outlook: Kenvue has suspended guidance, incurred $16 million of transaction costs in the quarter and continues to target a fourth-quarter close.
Sales and segment mix
Kenvue delivered its third consecutive quarter of both net and organic sales growth, but the composition differed materially by segment. Foreign exchange contributed 1.4 percentage points to reported growth, while acquisitions and divestitures had no impact.
- Self Care: Sales rose 2.2% to $1.589 billion, with organic growth of 0.6% driven by 1.2% value realization despite a 0.6% volume decline. The U.S. returned to organic growth, supported by Zyrtec, Pepcid, e-commerce and improved Tylenol consumption.
- Skin Health and Beauty: Sales increased 5.1% to $1.113 billion, including 3.7% organic growth from 2.7% value realization and 1.0% volume growth. Hair Care and Face Care, including OGX and Neutrogena innovations, drove gains across all regions.
- Essential Health: Sales rose 2.3% to $1.253 billion, with 1.1% organic growth. Volume increased 1.9%, led by Wound Care and Baby Care, but was partly offset by 0.8% unfavorable value realization and continued Oral Care pressure.
Margins and restructuring
Underlying profitability weakened despite higher sales. Adjusted gross margin fell 70 basis points to 60.2%, and adjusted operating margin fell 60 basis points to 22.1%. Management attributed the pressure to input-cost inflation, tariffs, unfavorable transactional foreign exchange and higher brand support, partly offset by value realization and supply-chain productivity savings.
- Segment profit: Adjusted operating income declined 1.4% to $1.013 billion. Skin Health and Beauty rose 24.8% to $186 million, but Self Care fell 2.8% to $512 million and Essential Health fell 10.3% to $315 million.
- 2026 restructuring: Kenvue recorded $69 million of restructuring and operating-model optimization charges in the quarter and $147 million in the first half. The initiative is expected to cost approximately $250 million in 2026 and deliver about $200 million of annualized pretax gross savings when complete.
- Cost offset: Six-month SG&A declined 1.7% to $2.990 billion, with SG&A as a percentage of sales improving 210 basis points to 38.0%, reflecting restructuring savings and lower separation costs.
Earnings and cash flow
Net income benefited substantially from a lower tax rate even as operating leverage was limited. The 23.7% effective tax rate compared with 28.6% a year earlier, primarily because of a valuation-allowance release, favorable jurisdictional earnings mix and tax-law changes. Interest expense also declined to $90 million from $94 million.
- GAAP results: Operating income increased 1.0% to $699 million, income before taxes rose 1.7% to $598 million, and net income increased 8.6% to $456 million.
- Adjusted results: Adjusted operating income was $873 million versus $870 million a year ago, while adjusted net income was $595 million versus $560 million. The quarter included $16 million of Kimberly-Clark transaction costs and $69 million of restructuring charges.
- Cash generation: First-half operating cash flow rose 12.2% to $1.177 billion. Capital expenditures declined to $203 million from $267 million, lifting free cash flow to $1.0 billion from $0.8 billion.
- Balance sheet: Cash was $1.110 billion and total debt was $8.480 billion at quarter-end, leaving net debt of approximately $7.4 billion.
Kimberly-Clark combination
The pending Kimberly-Clark transaction was the main reason Kenvue did not provide forward-looking guidance or hold a quarterly conference call. Shareholders of both companies approved the required proposals in January, and the U.S. antitrust waiting period expired in February. The transaction remains subject to foreign regulatory approvals and other customary closing conditions, with completion still expected in the fourth quarter of 2026.
- Consideration: Kenvue shareholders are scheduled to receive $3.50 in cash plus 0.14625 Kimberly-Clark shares for each Kenvue share.
- Ownership: Upon closing, Kenvue shareholders are expected to own approximately 46% of the combined company, with Kimberly-Clark shareholders owning approximately 54%.
- Quarterly cost: Pending-transaction and related costs were $16 million in the quarter and $32 million in the first half.
Tylenol innovation and litigation
Kenvue received FDA approval for Tylenol with Naproxen, the first OTC fixed-dose combination of acetaminophen and naproxen sodium. The product combines 650 milligrams of acetaminophen with 220 milligrams of naproxen sodium, has a three-year exclusivity period and is expected to reach major U.S. retailers soon.
- Product opportunity: Kenvue says the combination begins working in under 30 minutes and provides up to 12 hours of relief, expanding the Tylenol pain-relief portfolio.
- Acetaminophen litigation: The Second Circuit vacated and remanded portions of the prior federal judgment concerning claims alleging prenatal acetaminophen exposure is associated with autism spectrum disorder and ADHD. Kenvue said it cannot reasonably estimate the likelihood or magnitude of potential liability.
- Other claims: The 10-Q also disclosed new or continuing talc-related group proceedings in the U.K., Scotland and Australia, while noting that U.S. and Canadian talc liabilities are generally retained by Johnson & Johnson under the separation agreement.
