On Dec 29, 2015, we issued an updated research report on llinois-based Mead Johnson Nutrition Company MJN – a global leader in pediatric nutrition, especially for infants and children. The company’s Enfa family of brands, which includes the Enfamil infant formula, is a leading brand franchise in pediatric nutrition.
Despite facing near-term challenges in its emerging market segments, which are expected to continue in 2016 as well, the company witnessed strong performance in its recently introduced fully imported range of products in China, in the third quarter of 2015.
With a solid presence in more than 50 countries across the globe, Mead Johnson continues to witness consistent expansion in its international business. In the third quarter, the company witnessed improved pricing and extended lower discounts in Europe. In addition, although the recent economic slowdown affected Mead Johnson’s business performance in Latin America; excluding the impact of Venezuela, the region grew 3% at CER.
Further, in Argentina, Mead Johnson delivered a better-than-expected performance, as price increases outweighed the impact of depreciating currency. Mead Johnson also witnessed consistent strong performance in the Columbian market. In China, despite the current economic turmoil, the company witnessed strong performance in its Enfa brand.
Over the next three years, Mead Johnson plans to reduce its non-advertising and promotion operating expenses by 300 basis points with an intent to reinvest the majority of these savings in new growth initiatives. The project is targeting productivity in both external and internal cost and infrastructure. Further, apart from focusing on investments in growth initiatives and managing down its expense base, the company recently announced its plans to return cash to shareholders via a substantial share buyback program effective from the ongoing fourth quarter.
On the flip side, Mead Johnson continues to experience a tough competitive scenario in the pediatric nutrition market. Increased competitive pressure might lead management to reduce product prices, which in turn will hamper the company’s sales growth. Competitive pressure may also restrict Mead Johnson’s ability to increase prices in response to commodity, wage and other cost increases. Moreover, headwinds such as unfavorable currency movement and legal issues continue to pose threats.
We remind investors that Mead Johnson posted dismal financial numbers in the third quarter of 2015, missing the Zacks Consensus Estimate of both earnings and revenues. The company’s segmental performance was also considerably weak.
Currently, Mead Johnson carries a Zacks Rank #3 (Hold).
Key Picks in the Sector
Some better-ranked medical products stocks are ICU Medical, Inc. ICUI, INSYS Therapeutics, Inc. INSY and Nxstage Medical, Inc. NXTM. All three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment