Illinois-based manufacturer of pediatric nutritional products Mead Johnson Nutrition Company (MJN) is scheduled to report its fourth-quarter and full-year 2014 earnings results before the opening bell on Jan 29.
Last quarter, the company had delivered a positive surprise of 2.20%. Notably, in three of the past four quarters, Mead Johnson's earnings have outpaced the Zacks Consensus Estimate with an average beat of 3.07%. Let's see how things are shaping up prior to this announcement.
Factors at Play
Innovation has been a vital growth driver for Mead Johnson. Based on this strength, the company remains true to its commitment of investing aggressively in research and development for product innovation in the near as well as the long term.
Although management had made a strategic decision of not making any change in its product prices in mainland China owing to declining dairy prices and a more challenging economic environment in the country; over the long run, the company is optimistic about adjusting prices to reflect Mead Johnson's investment in innovation and improved formulations. Going forward, Mead Johnson plans to make fresh investments to develop its portfolio needs in China.
Despite witnessing a decline in its last reported quarter’s gross margin, Mead Johnson hopes to see some sequential improvement in its fourth quarter gross margin as lower dairy costs begins to benefit the company's cost of production.
On the flip side, the company continues to face challenging headwinds like a prevailing weak gross margin scenario, exposure to fluctuating foreign currency and certain adverse legal actions that can potentially impact the company's product sales.
For full year 2014, Mead Johnson continues to expect year-over-year sales growth of 9% and adjusted earnings per share in the range of $3.65–$3.72. The current Zacks Consensus Estimate of $3.71 lies near the upper end of the company's guidance. The same for revenues is pegged at $4.4 billion.
Earnings Whispers
Our proven model does not conclusively show that Mead Johnson is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Mead Johnson has an earnings ESP of -2.30%.That is because the Most Accurate estimate is 85 cents, while the Zacks Consensus Estimate is pegged higher at 87 cents.
Zacks Rank: Mead Johnson has a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider instead as our model shows they have the right combination of elements to post an earnings beat this quarter:
Hologic Inc. (HOLX), earnings ESP of +2.78% and a Zacks Rank #2 (Buy).
ZELTIQ Aesthetics, Inc. (ZLTQ), earnings ESP of +166.67% and a Zacks Rank #2.
CR Bard Inc. (BCR), earnings ESP of +0.45% and a Zacks Rank #3.
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