Digital And Operational Shifts Will Unlock Global Opportunity

Key Takeaways

• Enhanced digital capabilities and operational streamlining are expected to boost market share, cost efficiency, and margins while supporting continued revenue growth.
  
• Focus on innovation and emerging markets positions the company for sustained demand, premium pricing, and long-term expansion beyond mature regions.
  
• Operational complexity, lagging e-commerce adaptation, internal leadership turbulence, macroeconomic pressures, and slow innovation expose Kenvue to ongoing margin contraction and long-term competitive risks.

Catalysts

Operates as a consumer health company in the United States, Europe, the Middle East, Africa, Asia-Pacific, and Latin America.

• New leadership with strong digital and data expertise, combined with targeted investments in e-commerce and AI, positions Kenvue to capitalize on rising consumer adoption of digital health retail channels-this shift should drive higher volume growth, improved market share, and eventually support topline revenue acceleration.
  
• Strategic focus on streamlining operations, including reducing internal complexity and concentrating resources on best-selling brands and key regions, is expected to unlock cost efficiencies, improve decision-making speed, and enhance net margins and earnings over time.
  
• Accelerated innovation pipeline and shift toward consumer-centric product development (e.g., premium, natural, and dye-free options in Tylenol and oral health) aligns the portfolio with sustained demand for preventative health and wellness products, supporting resilience in core revenues and higher average selling prices.
  
• Modernization and further digitization of the supply chain, as well as procurement and network optimization, should reduce supply chain costs and working capital needs, resulting in better cash flow conversion and expansion in gross margins.
  
• Expansion and brand-building in emerging markets (LatAm and EMEA showing early gains), alongside leveraging the growing middle class and increasing disposable incomes in these areas, offers long-term revenue and earnings growth potential as these markets outpace mature geographies.

Kenvue Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Kenvue's revenue will grow by 2.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.4% today to 13.1% in 3 years time.
• Analysts expect earnings to reach $2.1 billion (and earnings per share of $1.11) by about September 2028, up from $1.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.8x on those 2028 earnings, up from 25.5x today. This future PE is greater than the current PE for the US Personal Products industry at 22.8x.
• Analysts expect the number of shares outstanding to grow by 0.09% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.23%, as per the Simply Wall St company report.

Kenvue Future Earnings Per Share Growth

Risks

• Kenvue's self-described significant complexity across SKUs, brands, and geographies has led to operational inefficiencies and underperformance, and addressing this complexity (through possible SKU/country/brand reductions or divestitures) could create short
• to medium-term revenue and volume headwinds, with slow turnover to improved profitability in the long-term.
  
• Kenvue is underdeveloped in e-commerce versus brick-and-mortar, an area where industry trends and consumer buying are rapidly shifting; failure to pivot quickly or effectively risks ongoing volume and market share losses, pressuring both revenue and net margins relative to more digitally agile competitors.
  
• Ongoing strategic review, leadership turnover, and not delivering on our growth potential statements from management signal internal uncertainty and transition risk, which may result in further disruption, restructuring costs, and unreliable earnings or margins during execution of any transformative plans.
  
• Macroeconomic headwinds (e.g., softening categories, muted consumer sentiment, retailer inventory destocking), as well as persistent inflation and tariffs not fully offset by productivity initiatives, are expected to cause margin contraction and lower net earnings-management even revised guidance to reflect declining organic sales and shrinking operating margin.
  
• While brands like Tylenol show strong performance, Kenvue's slow innovation velocity, heavy reliance on mature legacy brands, and delayed response to competitive shifts in mild, clean, and natural personal care segments (e.g., Listerine's weakness in alcohol-free) suggest long-term risks to revenue growth and profit margin due to changing consumer preferences and new disruptive entrants.

Valuation

• The analysts have a consensus price target of $22.6 for Kenvue based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $26.0, and the most bearish reporting a price target of just $19.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $16.3 billion, earnings will come to $2.1 billion, and it would be trading on a PE ratio of 25.8x, assuming you use a discount rate of 8.2%.
• Given the current share price of $18.87, the analyst price target of $22.6 is 16.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.