uploads///Mead Johnsons Performance in Q

How the Stronger Dollar and Market Dynamics Affected MJN in 1Q16


Jul. 20 2016, Updated 12:06 p.m. ET

1Q16 earnings recap

In this part of the series, we’ll do a quick recap of Mead Johnson’s (MJN) 1Q16 results, which were released on April 28, 2016. In 1Q16, Mead Johnson reported earnings and revenue ahead of analysts’ estimates. However, on a YoY (year-over-year) basis, revenue fell 20% to $962 million as compared to revenue of around $1.1 billion in 1Q15. As expected, currency translation impacted revenue by 600 basis points for the quarter, as 75% of Mead Johnson’s operations are international.

Mead Johnson’s three geographical operating segments are Asia, Latin America and North America, and Europe. The strengthening US dollar affected revenue in all of the company’s geographies, especially China, Mexico, and Argentina.

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Earnings fell in 1Q16

Despite 1Q16 earnings coming in 4% ahead of estimates, they fell 20% on a YoY basis. The 1Q16 adjusted EPS (earnings per share) came in around $0.87 compared to $1.09 in 1Q15. Currency translation had a negative impact on the company’s earnings by $0.10 per share. EPS was also negatively affected by sales of $0.16 per share. There was also a $0.06 per share effect from advertising and promotion expenses that were balanced by savings of $0.07 from the “Fuel for Growth” initiative.

Decline in operating profit

Lower sales resulted in a decrease in operating profit as well. Operating profit for the first quarter was 18% below the prior year’s quarter at $244 million. The operating profit was $300 million in 1Q15. Lower sales, currency translation effects, and increased channel investment and promotional activities affected the operating profit for the Asia segment. Sales fell 22% on a constant dollar basis. Lower sales in Venezuela caused a decline of 11% in Latin America’s operating profit as well.

Peer performance

Mead Johnson’s peers in the industry include McCormick & Company (MKC). The company reported revenue of $1.1 billion for its most recent quarter. J.M. Smucker (SJM) and Flowers Foods (FLO) reported revenue of $1.8 billion and $0.85 million, respectively, in their last reported quarters.

To gain exposure to Mead Johnson stock, you can invest in ETFs like the Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) and the Fidelity MSCI Consumer Staples Index ETF (FSTA). They invest 3.1% and 0.82%, respectively, of their portfolios in Mead Johnson stock.


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