Kenvue rebounds as doctors deny Trump’s Tylenol, autism claim

00:01 Speaker A

stock of the day, the Trump administration warned on Monday that the use of Tylenol during pregnancy might be linked to autism in children. Doctors and scientists have come out strongly pushing back on the warning, which has somewhat stabilized shares of Tylenol maker Kenvue, but the damage has been done to Kenvue as a result of this issue, which the Trump administration began highlighting months ago. Kenvue stock is down 22% in the past month. Yahoo Finance data shows Kenvue shares trade at its lowest price to earnings multiple since being split off from J&J into a public company in 2023.

00:39 Speaker A

Evercore ISI sheds light on how important Tylenol is to Kenvue’s financials. Tylenol is Kenvue’s biggest business in the US at about 15% of its US sales. Tylenol has been the second most frequently purchased consumer health brand in the US the past 52 weeks. So, what’s the play here for investors? Still with me, Stephanie Guild, Brooke De Palma and Inez Ferre. Brooke, set this up for us because, um obviously the stock has been getting hammered. It has been under a lot of pressure. Um I I’m not sensing the appetite in the market to come in here and and get involved with a story like this.

01:25 Speaker B

Brian, what we’re seeing this morning is the stock move higher up about 4 and a half percent. and based on what we’re hearing from the street is that they expected this reaction to happen today. largely based upon two points. City analysts pointing out in a note that this reaction has given a better than feared outcome as some investors had feared an outright ban of Tylenol or more severe sales limitations and or the release or rather did not get the release of new scientific data establishing direct casual link between acetamin and autism. And so I think this is a a better than feared result. Of course, we’re still waiting to hear more if there is an actual link that the White House is, uh, you know, referencing. But largely we know that Tylenol is still going to be able to be sold and this analyst saying that even assuming a a 10% decline for sales and profit for the brand, they estimate about a modest roughly 40 million to 50 minute, uh 50 million profit impact. That really would have be about a 1 to 2% hit, uh one to two cent hit to earnings per share. And so right now investors reacting to what could be a a positive outcome out of this. Of course, it’s still being sold, it’s still on shelves and to be frank, Brian, this is in every American’s household largely as one of uh Kenvue’s top sales items.

02:45 Speaker A

What we don’t know Inez is you know, what the company’s next few quarters might look like and the the the extent of the consumer backlash. This is not like the cracker barrel issue where you make a change in your logo and sales fall off a cliff for two weeks. I mean, this might do some real permanent damage and that’s what the market is trying to figure out. What is the value destruction for a company like Kenvue?

03:22 Speaker C

Yeah, exactly. Look, the company is pushing back against these claims basically saying that sound science says that Tylenol does not cause autism, but make no mistake, the autism issue is a a a big issue in the US. It’s a hot button issue and it’s a hot button issue also because uh you have a lot of distrust uh from uh people from uh towards the government, towards pharma, etc. So this comes at a not so great time. These claims are coming at a time where it’s uh it’s it’s a delicate topic and it’s a delicate situation and uh and look CFR research is saying that this threatens to damage to uh damages, uh threatens to reverse a recent positive trend where Tylenol has been gaining market share. So we’ll have to see the developments there. And also saying that the potential demand disrupts uh it really overshadows uh Kenvue’s turnaround trajectory because this is a company which spun out of Johnson and Johnson back in 2023. and as you mentioned, Tylenol is a big revenue generator for this company. So it is a difficult, difficult trajectory from here, uh if the government is claiming one thing and the company’s claiming another.

04:47 Speaker A

And then, you know, Stephanie, I’m sure there’s those folks out there that see this news and suddenly see, wow, maybe there’s some value here in getting involved with the Ken you, but that that may not necessarily be the case because we again, we don’t know the extent of the damage that’s been done.

05:14 Speaker D

Yeah, we don’t know. I mean, today’s bounce seems like a, you know, sell on the rumor, buy on the news kind of, you know, pop up, but you don’t really know the impact. The one thing I would say is that I just think the administration is just going to be laser focused on this is issue as a whole, and this isn’t the first time this has come up for Tylenol. There were a number of class action lawsuits well before this that were claiming that if, you know, you were, you were pregnant, you took Tylenol, you know, this could have led to your child having ADHD, which we know is also on the rise. Um so I don’t think that this is something that um is going to go away for them and and um and maybe it does reduce their sales just because people are become just a little more afraid, um you know, to to ingest it, but I don’t think that it means the end for people using Tylenol either. So it just depends on whether the the damage is already reflected in the price.

06:14 Speaker A

Does it put a black flag over the pharma space uh as a potential investment?

06:21 Speaker D

I think the black flag was kind of already there. Um I think the pharmaceutical industry as a whole has been in doubt for a while because if you just take a step back, it does feel like our incentives actually aligned to keep us healthy. There it doesn’t mean that all companies are this way, but there are certainly some that it feels like, you know, it was more about sales and it was about keeping us well. So I do think you have to be careful and pick your spots within the the pharmaceutical sector. You also have to be aware that, you know, how much are they making outside of the US versus here. There’s definitely going to be some, um, attacks, I think from the administration when it comes to tariffs and also, you know, are they making investments here in the US or not? Those at least for investors, that’s what you have to worry about.

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