The Team Sky rider, who won gold as part of Britain's team pursuit squad on the track at London 2012 and in contention for a place in the squad for Rio this year, crashed near the end of the third stage.
Kennaugh was expected to be a key man in Team Sky's Tour de France campaign in support of defending champion Chris Froome at the July 2-24 stage race.
His crash came on the same day that Team Sky's leader at the Giro d'Italia, Mikel Landa, was forced to abandon because of illness on stage 10.
(Reporting by Martyn Herman; Editing by John O'Brien)
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