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Mead Johnson: Currency Mars Q3 Growth in Emerging Markets

On Nov 27, 2015, we issued an updated research report on Illinois-based Mead JohnsonNutrition CompanyMJN - 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.

Mead Johnson posted disappointing financial numbers in the third quarter of 2015, missing the Zacks Consensus Estimate of earnings and revenues. The company's segmental performances were also considerably weak.

In fact, the near-term challenges in its emerging market segments are expected to continue in 2016 as well. This forced the company to reduce its earnings per share guidance for full year 2015.

Further, unfavorable currency movement remained a major dampener in third-quarter 2015, significantly affecting the company's business performance in Asia as well as Latin America. In fact, the consistent strengthening of the dollar and its impact on local currency translation weighed on all of Mead Johnson's reportable overseas segments. Significant sales weakness was observed in the company's Southeast Asian market as well.

In the third quarter, overall sales declined 6% owing to foreign currency fluctuations. Currently, Mead Johnson anticipates adverse currency translation to impact total sales growth in 2015 by 5%.

According to a recent report by International Monetary Fund (IMF), the projected growth for the emerging market economies (which recently suffered a financial turmoil), particularly Brazil and China, is 4% for 2015, lower than 4.6% achieved in 2014. This slowdown also affected Mead Johnson's business performance in the emerging markets. As a result, the company witnessed a 15% year-over-year slump in its sales therein and had to invest more heavily in the Asian markets to generate considerable level of sales and volume.

On a positive note, over the next three years, the company 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. Further, apart from focusing on investments in growth initiatives and managing down its expense base, Mead Johnson recently announced its plans to return cash to shareholders via a substantial share buyback program beginning in the fourth quarter.

Currently, Mead Johnson carries a Zacks Rank #5 (Strong Sell).

Key Picks in the Sector

Some better-ranked medical stocks are Hill-Rom Holdings, Inc. HRC , ICU Medical, Inc. ICUI and Nxstage Medical, Inc. NXTM . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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MEAD JOHNSON NU (MJN): Free Stock Analysis Report

NXSTAGE MEDICAL (NXTM): Free Stock Analysis Report

HILL-ROM HLDGS (HRC): Free Stock Analysis Report

ICU MEDICAL INC (ICUI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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