Analysts’ Ratings of Mead Johnson Nutrition after 2Q16 Earnings

On August 1, 2016, Mead Johnson Nutrition Company (MJN) was trading at $87.72. After 2Q16 earnings, Wall Street analysts’ target price for Mead Johnson has changed. However, the recommendations remain the same. Approximately 38% of analysts still rate MJN a “buy,” 56% rate it a “hold,” and 6% rate it a “sell.”

After 2Q16 earnings, the average broker target price for Mead Johnson Nutrition increased by 4% to $94.90 from $91.0. This implies a potential return of 8% compared to the closing price of $87.72 on August 1.

Mead Johnson Nutrition’s peers have the following target prices:

• Kellogg (K) has a target price of $79.27. Kellogg was trading 4% above its target price on August 1.
• Flowers Foods (FLO) has a target price of $18.57 and a return potential of 3%.
• Campbell Soup (CPB) has a target price of $63.92. Campbell Soup was trading 3% above its target price on August 1.

Mead Johnson Nutrition is part of the Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS). RHS invests 3.1% of its portfolio in Mead Johnson Nutrition and 2.5% of its holdings in Campbell Soup. The iShares Global Consumer Staples ETF (KXI) invests 0.59% of its holdings in Kellogg.

J.P. Morgan gave Mead Johnson Nutrition the highest target price of $105. This is ~20% higher than the closing price of $87.72 on August 1. Two days before 2Q16 results, J.P. Morgan upgraded MJN to “overweight” from “neutral.” It also updated the target price to $105 from $85. The firm believes that Mead Johnson Nutrition’s long-term margins will rise faster and higher than Wall Street analysts expect.

On June 30, Credit Suisse reduced the stock’s target price to $96 and maintained its “strong buy” rating. After 2Q16 results, the firm updated the target price to $100, which is consistent with its rating.

BMO Capital Markets and Goldman Sachs also gave the stock optimistic target prices of $97 and $96, respectively. These prices imply returns of 11% and 10%, respectively, in the next 12 months. Goldman Sachs rated the stock a “hold,” and BMO Capital Markets gave it a “strong buy.” Others who rated the stock a “strong buy” are William Blair and Wells Fargo Securities.

Morgan Stanley assigned Mead Johnson Nutrition the lowest target price of $92. This is 5% higher than the closing price of $87.72 on August 1. William Blair, Wells Fargo Securities, Gabelli, Morningstar, and First Global Stockbroking didn’t provide target prices. However, the first two rated Mead Johnson Nutrition a“strong buy,” and the last three rated it a “hold.”