Kenvue Earnings: Category Softness Weakens Volume but Favorable Long-Term Outlook Remains

Wide-moat Kenvue reported tepid third-quarter earnings with results slightly below our expectations. Total sales of $3.9 billion were down 0.4% year over year, while we expected about 1% growth. On organic basis, revenue was up 2.5% and down 1.6% from price/mix and volume, respectively. Weakening pricing power driven by cooling inflation and volume loss in key categories make this quarter’s organic growth number the weakest in the year so far. Performance was mixed regionally as Europe, which grew double-digits, outpaced weak US and Asia markets, which were both down about 2%. After digesting the results, we've trimmed some of our near-term assumptions but changes were immaterial to our valuation and we maintain our fair value estimate of $26 per share.