Among the key stocks in focus in today’s session is Kenvue (NYSE:KVUE). The company, which was spun off from parent Johnson & Johnson (NYSE:JNJ) almost exactly one year ago, is seeing strong traction in the market today. KVUE stock is up 14% in early afternoon trading after the company reported its second-quarter results.
As we highlighted already today, Kenvue’s numbers were well ahead of analyst estimates. Kenvue beat on the top and bottom lines, with revenue of $4 billion coming in ahead of estimates of $3.95 billion and earnings per share of 32 cents. That’s handily beating the analyst consensus that the company would report 27 cents in earnings for the quarter.
These numbers did represent a 0.3% year-over-year decline, but coming ahead of analyst estimates is always a good thing. Thus, the market appears to be cheering many of the productivity gains the company has made as part of its efficiency initiatives over the past year. Importantly, Kenvue also reaffirmed its revenue growth and earnings per share outlook for the coming year, which the market is also rewarding today.
Let’s dive more into what was reported, and why the market is applying a new multiple to KVUE stock today.
KVUE Stock Soars Following Strong Earnings
Earnings season typically allows investors to re-rate stocks according to how they truly performed in a given quarter. In the case of Kenvue, these numbers seem to be very strong across the board. The reaffirmation of guidance is a big positive for investors who may have been concerned about continued revenue growth deterioration moving forward.
Kenvue is a leading consumer health company with several name brands, including Benadryl, Tylenol, Motrin and many others consumers are likely very aware of. With roughly one year’s worth of quarterly earnings reports now under the company’s belt, investors can better gauge where they see the company headed from here. For now, the clear focus appears to be on profitability, and that’s something existing investors like to see.
As Kenvue reaches to provide even more efficient operations and better bottom-line results moving forward, the market appears to believe a higher multiple is warranted. After today’s results, KVUE stock trades at around 16 times forward earnings. That’s a reasonable multiple for a consumer health company making the right steps forward.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
