Kenvue: Stock Tumbles on Kennedy’s Pending Report on Tylenol and Autism

Key Morningstar Metrics for Kenvue

• Fair Value Estimate: $24.50
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

The Wall Street Journal reported the Department of Health and Human Services is expected to release Secretary Robert F. Kennedy’s report suggesting a potential link between autism and acetaminophen, a main ingredient in Tylenol. Shares in Kenvue KVUE, the maker of Tylenol, tumbled over 10% on the news.

Why it matters: Tylenol is Kenvue’s largest product by sales, generating roughly $1 billion annually and making up a high-single-digit percentage of the firm’s total revenue, so any potential threat to the product could have a noticeable impact on the firm’s earnings power.

• Kenvue’s results have been soft in recent quarters, most notably in skin health and beauty, but self-care is usually its strongest segment, which generates reliable organic growth. Any disruption in the category, especially from its largest brand, could further damp results.
• Previously, the Tylenol litigation overhang on shares dissipated when a Manhattan district court judge dismissed hundreds of lawsuits against Tylenol, ruling in December 2023 and again in 2024 that the evidence suggesting any link between Tylenol and autism/ADHD was not credible.

The bottom line: We maintain our $24.50 fair value estimate for wide-moat Kenvue. Without knowing the report’s specific details, we believe it’s premature to assess the ensuing public reaction or the potential impact on Tylenol sales, so we have not adjusted our model.

• The US Food and Drug Administration, in a rare move, opined on the issue in September 2023 and concluded that “the limitations and inconsistent findings of current observational studies” are “unable to support a determination of causality.”
• Investor confidence in Kenvue was already soft, so this breaking news is causing more headaches. But our long-term confidence in the name remains intact, thanks to the firm’s portfolio of category-leading brands, and we think this marks an attractive entry point for this high-quality name.