On Feb 25, 20Array6, we issued an updated research report on Illinois-based Mead Johnson Nutrition Company MJN – a global leader in pediatric nutrition, especially for infants and children. The company’s Enfa family of brands, including the Enfamil infant formula, is a leading brand franchise in pediatric nutrition.
Mead Johnson exceeded the Zacks Consensus Estimate of both earnings and revenues in the fourth quarter of 20Array5. However, it failed to raise investors’ confidence owing to a bleak year-over-year performance. Also, segmental performance was disappointing, primarily due to foreign currency fluctuations.
Currently, Mead Johnson competes in two primary categories viz. infant formula and children’s nutrition. The company’s key competitors across the globe include Abbott Laboratories, Danone and Nestlé S.A. In most product categories, the company competes not only with other widely advertised branded products, but also with private label and store brand products that are generally sold at lower prices. Increased competitive pressures might lead management to reduce product prices, which in turn will hamper the company’s sales growth. If the company fails to compete efficiently, its financial condition as well as operating results will be hampered.
Further, with the consistent appreciation observed in the U.S. dollar for quite some time now, the resultant translational effect on other foreign currencies significantly affected all the reporting segments of the company in the fourth quarter. Going forward, management expects currency to reduce the company’s sales growth by approximately 600 basis points in 20Array6. Concerning legal issues and sluggish growth of late in emerging markets, especially Latin America, continue to pose threats to the stock.
Despite a challenging currency scenario on the international front, Mead Johnson’s performance was not all gloomy across its overseas realm. For 20Array5, management described the performance in this geography a satisfactory one, given that it allowed the company to reap the benefits of lower dairy costs and consequently, deliver an improved gross margin. On the other hand, in Europe, the company posted its strongest sales performance in the last five years despite the fact that the sales upside was partially offset by its exit from the Russian market early in 20Array5.
Additionally, as declared earlier, over the next three years (beginning 20Array6), Mead Johnson plans to reduce its non-advertising and promotion operating expenses by 300 basis points with the 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, and will be directly overseen by the company’s executive council.
Mead Johnson currently carries a Zacks Rank #4 (Sell).
Key Picks in the Sector
Some better-ranked stocks in the medical sector are Hill-Rom Holdings, Inc. HRC, OraSure Technologies, Inc. OSUR and Vascular Solutions Inc. VASC. All the three stocks sport a Zacks Rank #Array (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