Kenvue: Hints at Weaker-Than-Expected Second Quarter, but Our Long-Term View Remains Unchanged

Wide-moat Kenvue's shares declined roughly 6% after the firm hinted at persistent market challenges at an investor conference. Management pointed to two dynamics—inventory destocking and weak seasonality—that are likely to weigh down next quarter results, and we think June 3’s share movement is baking in some near-term pessimism as well as a cautious outlook for the remainder of the year. However, our long-term outlook on the name remains unchanged, and we reiterate our fair value estimate of $24.50 per share. We think June 3’s market reaction is an overreaction from short-term investors as well as some cyclical pressure and believe Kenvue is still well positioned in the industry with its portfolio of category-leading brands.