On March 11, we issued an updated research report on Mead Johnson Nutrition Company MJN, a global leader in pediatric nutrition, especially for infants and children.
We remain on the sidelines with regard to Mead Johnson's mixed fourth-quarter 2014 financial results, which were released on Jan 29. The company reported adjusted earnings per share of 92 cents in the quarter, which exceeded the Zacks Consensus Estimate by 4 cents. Adjusted earnings were also 10 cents higher than the year-ago number.
On the other hand, revenues increased 3.2% year over year to $1.094 billion, but missed the Zacks Consensus Estimate of $1.103 billion. Volume and price benefited sales in the reported quarter by 3% and 5%, respectively, which was partially offset by a 5% unfavorable foreign exchange impact.
At present, Mead Johnson markets its products internationally in more than 50 countries and derives a major portion of its revenues from these markets. In the year 2014, 76% of the company's net sales were generated in countries outside the U.S. In the last reported quarter, barring China, the balance of Asia demonstrated solid sales growth, including two of the larger markets of Malaysia and the Philippines, driven by strong execution and product innovation.
Sales growth performance was also impressive across Mexico, the Caribbean and Central America – wherein Mead Johnson experienced strong revenue growth as the company re-launched its Enfa franchise and introduced 7 new products toward the end of 2014. Despite a tough economic environment in Brazil, Mead Johnson continued to expand its market share in the country in the infant formula category.
However, despite observing strong sales growth in Asia in 2014, management remains concerned about the higher dairy costs in that geographical segment which substantially impacted the company's profit margins in the region. Foreign exchange headwind remains another major downside.
As the company enters 2015, management expects to face significant headwinds from a strengthening dollar and anticipates earnings to remain partially exposed to currency fluctuations. However, management expects lower commodity costs will allow the company to improve gross margins and invest incrementally in its brands. We believe it is Mead Johnson's diverse geographic portfolio that has allowed it to deliver continued solid revenue growth in a challenging global economic environment.
The stock currently carries a Zacks Rank #3 (Hold).
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