Benadryl parent's stock soars as allergy season got a lot worse, boosting sales

By Tomi Kilgore

Adjusted profit rose, while Wall Street was expecting a decline, as gross margin improved

Shares of Kenvue Inc. shot up toward a record gain, after the parent of consumer health brands including Band-Aid, Tylenol and Benadryl reported second-quarter profit that rose above expectations, boosted by productivity improvements and higher pricing.

Revenue also rose more than forecast, as sales of allergy products accelerated late in the quarter.

"We entered the second quarter of 2024, experiencing a slow start to the allergy season and observing a continuation of tight inventory controls in retail through May," Chief Financial Officer Paul Ruh said on the post-earnings all with analysts, according to an AlphaSense transcript.

"However, demand for allergy accelerated in June and we activated our Zyrtec and Benadryl brands successfully and gained share," Ruh said.

He added that the company's smoking cessation business - Kenvue is also the parent of Nicorette gum - "also had a strong quarter overall."

Kenvue's stock (KVUE) ran up 13.2% in morning trading, enough to pace the S&P 500 index's SPX gainers.

That put the stock on track for the biggest one-day gain since the company's separation from Johnson & Johnson (JNJ) was completed a year ago. The previous record gain was 7.3% on Dec. 7.

Net income fell to $58 million, or 3 cents a share, from $430 million, or 23 cents a share, in the same period a year ago.

Excluding nonrecurring items, such as a $488 million charge to adjust the value of long-lived assets, adjusted earnings per share rose to 32 cents from 31 cents, while the FactSet consensus called for a decline to 28 cents.

Sales slipped 0.3% to $4.00 billion, above the FactSet consensus of $3.93 billion, as a 2.1% increase in price and mix offset a 0.6% decline in volume.

Profit margin improved to 59.1% from 55.5% as supply chain efficiencies led to productivity gains, and as the company has been "actively reducing" costs.

For the company's business segments, self care sales slipped 1.6% to $1.64 billion and skin health and beauty sales were down 3.8% to $1.10 billion, while essential health sales increased 4.9% to $1.26 billion.

For 2024, the company said it continues to expect adjusted EPS of $1.10 to $1.20 and sales growth of 1% to 3%. In comparison, the current FactSet consensus for EPS is $1.14 and the sales consensus of $15.65 billion implies 1.3% growth.

The stock has lost 4.3% year to date, while the S&P 500 has gained 10.5%.

-Tomi Kilgore

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08-06-24 1059ET

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