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KI

Kenvue Inc. (KVUE)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was mixed: revenue fell 3.5% to $3.76B on organic −4.4%, but margins held and adjusted EPS was flat YoY at $0.28; GAAP EPS was $0.21 .
  • Versus S&P Global consensus, KVUE delivered a small revenue miss but an EPS beat: revenue $3.764B vs $3.823B*, adjusted EPS $0.28 vs $0.265*; adjusted EBITDA broadly in line* .
  • Management affirmed FY25 guidance (net and organic sales down low‑single‑digits; adjusted EPS $1.00–$1.05; adjusted ETR 25.5–26.5%) despite macro and tariff headwinds, citing supply chain productivity and Q4 pipeline momentum .
  • Strategic developments dominated: Kimberly-Clark announced a definitive agreement to acquire KVUE; no Q3 earnings call was held, and prepared remarks were posted instead. Kirk Perry was named permanent CEO; KVUE added senior leaders in North America and Digital/Marketing .
  • Stock reaction catalyst: the KMB transaction (cash and stock consideration) and synergy framework (targeting $2.1B EBITDA synergies net of reinvestment, H2’26 close) reframed the outlook and will likely drive estimate/model changes more than near-term fundamentals .

What Went Well and What Went Wrong

  • What Went Well
    • EPS resilience despite top-line pressure: adjusted EPS held at $0.28 YoY on productivity savings and disciplined spend; GAAP EPS rose to $0.21 from $0.20 .
    • Margin management: gross margin expanded 60 bps (adjusted +50 bps) on global supply chain optimization offsetting lower volume, inflation, tariffs, FX, and price investments .
    • Brand strength in key franchises: Zyrtec kept #1 leadership (17 straight quarters adult) with innovations; Tylenol continued share gains; Nicorette momentum aided by vaping indication in UK .
    • Leadership and focus: Kirk Perry named permanent CEO; hiring of North America President and Chief Digital & Marketing Officer to accelerate digital, AI, and marketing capabilities .
  • What Went Wrong
    • Revenue contraction: net sales −3.5% (organic −4.4%) on −4.0% volume and −0.4% price/mix due to strategic price investments, trade inventory reductions at some customers, shipment timing in China, and low seasonal incidences hurting Self Care .
    • Segment softness: Skin Health & Beauty net sales −3.2% and Essential Health −3.3% YoY; Skin Health & Beauty pressured in APAC and North America despite EMEA/LatAm growth .
    • Operating leverage: adjusted operating margin contracted 60 bps YoY to 21.5% as higher brand support and mix offset gross margin gains; GAAP operating margin −10 bps to 16.7% .

Financial Results

Quarterly trend (company-reported, USD):

MetricQ1 2025Q2 2025Q3 2025
Revenue ($MM)$3,741 $3,839 $3,764
GAAP Diluted EPS ($)$0.17 $0.22 $0.21
Adjusted Diluted EPS ($)$0.24 $0.29 $0.28
GAAP Gross Margin (%)58.0% 58.9% 59.1%
Adjusted Gross Margin (%)60.0% 60.9% 61.2%
GAAP Operating Margin (%)14.9% 18.0% 16.7%
Adjusted Operating Margin (%)19.8% 22.7% 21.5%
Adjusted EBITDA ($MM)$808 $938 $876
Adjusted EBITDA Margin (%)21.6% 24.4% 23.3%

Q3 2025 vs S&P Global consensus:

MetricConsensus*ActualSurprise
Revenue ($MM)3,823.7*3,764.0 −$59.7
Adjusted EPS ($)0.265*0.28 +$0.02
Adjusted EBITDA ($MM)875.5*876.0 +$0.5

*Values retrieved from S&P Global.

Segments (Q3 2025):

SegmentNet Sales ($MM)YoY Reported ChangeOrganic Sales ChangePrice/MixVolume
Self Care$1,564 −3.8% −5.3% −0.3% −5.0%
Skin Health & Beauty$1,038 −3.2% −3.5% −1.3% −2.2%
Essential Health$1,162 −3.3% −4.2% +0.1% −4.3%
Total$3,764 −3.5% −4.4% −0.4% −4.0%

Additional KPIs (Q3 2025):

KPIQ3 2025
Net Income ($MM)$398
Adjusted Net Income ($MM)$538
Adjusted Effective Tax Rate (%)24.0%
Net Interest Expense ($MM)$93
YTD Free Cash Flow ($B)$1.0
Cash & Equivalents ($B)$1.1
Total Debt ($B)$9.0
Net Debt ($B)$7.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY25+1% to +3% (FX ~−1%) Down low‑single‑digits (FX ~neutral) Lowered (Q2) / Maintained (Q3)
Organic SalesFY25+2% to +4% Down low‑single‑digits Lowered (Q2) / Maintained (Q3)
Adjusted Operating MarginFY25Decline YoY (tariffs) Decline YoY Maintained
Adjusted Diluted EPSFY25About flat YoY (low‑single‑digit FX headwind) $1.00–$1.05 (low‑single‑digit FX headwind) Lowered (Q2) / Maintained (Q3)
Adjusted Effective Tax RateFY2525.5%–26.5% 25.5%–26.5% Maintained
DividendOngoing$0.2075/qtr declared 7/30/25 No update in Q3 materials—

Notes: Q3 2025 affirmed the Q2 outlook; no changes to ranges in Q3 .

Earnings Call Themes & Trends

Note: KVUE did not host a Q3 call; prepared remarks were posted. Themes below track Q1 call, Q2 materials, and Q3 prepared remarks.

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Macro/SeasonalityCautious consumer; low seasonal incidences in EMEA/APAC; US cough/cold replenishment; tariffs ~$150M gross impact Weak allergy/sun; strategic price investments; destocking in China Sequential deceleration in global weighted category; low seasonal incidences pressured Self Care Continued headwinds
Supply Chain/ProductivityTSA exits completed; productivity savings supporting margins Productivity offsets FX/inflation but mix/price investments weighed on adj gross margin Supply chain optimization expanded gross margin +60 bps Positive execution
Pricing/Trade InvestmentStrategic US price/trade investments to improve competitiveness Planned strategic price investments lowered value realization Price investments largely behind as Q4 begins Easing into Q4
Self Care performanceShare gains in Tylenol, Zyrtec; US strength, APAC destocking Seasonal weakness NA; volumes pressured Low incidences hurt Allergy/CCF; US & China shipment/inventory dynamics; consumption > organic sales Mixed; underlying demand > shipments
Skin Health & BeautyUS consumption improving; Neutrogena Gen Z engagement US/APAC softness; EMEA strength US and EMEA consumption improving; stabilizing distribution; e‑comm push; Prime Day share gains Gradual improvement
Oral Care (Listerine)Premium platforms strong; Amazon growth —Lagging category in NA; “Wash Your Mouth” campaign; HCP engagement; on‑the‑go sachets Remedial actions underway
Regulatory/Legal——UK talc proceedings acknowledged; acetaminophen safety statement; Pediatric Tylenol ~1% of net sales Addressing external noise
Digital/AI——Appointing Chief Digital & Marketing Officer to drive digital, AI adoption and consumer experience Capability build

Management Commentary

  • CEO Kirk Perry: “Third quarter results keep us on track to deliver our full year guidance and we are confident in the decisive actions we are taking to accelerate Kenvue’s performance and unlock the inherent value of our brands.”
  • CFO Amit Banati: “Global weighted category growth rate and our consumption slowed sequentially… trade inventory reductions at some domestic customers… year‑over‑year changes in shipment timing in China… value realization was unfavorably impacted by planned strategic investments in price in the U.S., which should be largely behind us as we enter the fourth quarter.”
  • On Tylenol/acetaminophen: “Rigorous, independent research… confirms there is no credible data that shows a proven link between taking acetaminophen and autism… Measured brand trust in Tylenol remain[ed] at the same level as early September… U.S. Children’s Tylenol accounts for approximately 1% of the Company’s Net sales.”
  • On strategy and talent: KVUE named Kirk Perry permanent CEO; appointed Group President North America and a Chief Digital & Marketing Officer with mandates in digital transformation, AI adoption, and data‑driven engagement .

Q&A Highlights

Q3 2025: No earnings Q&A held; prepared remarks were posted due to the announced Kimberly‑Clark transaction . Notable investor Q&A from the KMB/KVUE transaction call:

  • Deal terms and synergies: Kenvue valued at ~$48.7B; consideration per KVUE share: $3.50 cash + 0.14625 KMB shares; targeting $2.1B EBITDA synergies (≈$1.9B cost, ~$0.5B revenue with ~$0.3B reinvestment). Mid‑single‑digit EPS dilution in year 1 and accretion in year 2 post-close; target leverage ~2x within 24 months post‑close; H2 2026 expected close, subject to approvals .
  • Revenue synergy confidence: Leadership cited “low‑hanging” geographic complementarity (e.g., India, China, Korea) and capability transfer (e‑commerce, category management) as tangible drivers; management indicated conservative revenue synergy assumptions with intent to outperform .
  • Cost structure: Kenvue’s SG&A framed as higher vs CPG peers due to pharma heritage; both teams highlighted opportunity to apply KC’s lean model and margin management discipline .

Q1 2025 call Q&A context for trend continuity:

  • Tariffs: ~$150M gross 2025 impact embedded in outlook; mitigation via productivity, alt sourcing, RGM; potential absorption over time depending on policy path .
  • Skin Health & Beauty: US consumption improvements tied to pricing architecture and marketing; early signs of Gen Z penetration gains in Neutrogena; focus on shelf space and ROI‑positive spend .

Estimates Context

  • Q3 2025 delivered a modest top‑line miss but an EPS beat versus S&P Global consensus: revenue $3.764B vs $3.824B* (−$60M), adjusted EPS $0.28 vs $0.265* (+$0.02), and adjusted EBITDA broadly in line* .
  • Q2 2025 also tracked close to consensus (revenue slightly below, EPS slightly above)*, indicating execution stability in earnings amid top‑line pressure.
  • Given guidance reaffirmation and management’s comment that US price investments are largely behind into Q4, consensus may drift modestly lower on revenue but hold/lift on EPS near-term as mix, productivity, and spend discipline support margins into year‑end .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Fundamentals stabilizing into Q4: Despite −4.4% organic sales in Q3, gross margin expanded and adjusted EPS met/beat expectations; US price investments rolling off should ease value realization pressure sequentially .
  • Guidance intact: FY25 ranges (sales down LSD; EPS $1.00–$1.05) were affirmed even with tariffs/FX, implying confidence in supply chain productivity and Q4 innovation support; watch execution on Q4 seasonal categories .
  • Segment watchlist: Self Care’s underlying consumption remains stronger than shipments; Skin Health & Beauty shows early US/EMEA traction but requires sustained e‑comm and distribution stabilization; Listerine turnaround actions ongoing .
  • Cash and balance sheet are solid: YTD FCF of ~$1.0B; net debt ~$7.8B with steady interest expense; supports continued brand investment ahead of potential integration .
  • Strategic overhang becomes catalyst: The Kimberly‑Clark deal reframes the equity story—deal terms and synergy execution will drive medium‑term value; timing (H2’26), regulatory path, and integration planning become key variables .
  • Litigation/regulatory noise monitored but contained: Company reaffirmed acetaminophen safety stance and noted pediatric Tylenol is ~1% of sales; acknowledged UK talc proceedings; brand trust remained stable per internal tracking .
  • Near‑term trading: Expect shares to trade on M&A dynamics and spread to KMB more than quarterly run‑rate; within fundamentals, watch Q4 seasonal sell‑through, Skin Health US e‑comm performance, and price/mix normalization pace .

Disclosures on Non‑GAAP and Estimates

  • Company‑reported adjusted metrics reflect exclusions detailed in reconciliations (e.g., amortization, restructuring, separation costs). See non‑GAAP reconciliations in Q3 2025 8‑K for specifics .
  • Consensus figures marked with an asterisk (*) are values retrieved from S&P Global. Definitions for EBITDA may differ from company‑reported Adjusted EBITDA.