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Mead Johnson & Company Gets Upgraded to ‘Neutral’

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Price movement

Mead Johnson & Company (MJN) has a market cap of $17.0 billion. It rose by 0.46% to close at $90.95 per share on July 13, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 1.9%, 9.4%, and 16.4%, respectively, on the same day. MJN is trading 3.8% above its 20-day moving average, 6.9% above its 50-day moving average, and 15.4% above its 200-day moving average.

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Related ETFs and peers

The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) invests 3.1% of its holdings in Mead Johnson & Company. The ETF tracks an equal-weighted index of large-cap US consumer staples stocks drawn from the S&P 500. The YTD price movement of RHS was 11.8% on July 13.

The First Trust Capital Strength ETF (FTCS) invest 2.2% of its holdings in Mead Johnson & Company. The ETF tracks an equally weighted US Large Cap equity index targeting companies with a strong cash balance, a low long-term debt to market cap ratio, and a high return on equity.

The market caps of MJN’s competitors are as follows:

  • WhiteWave Foods (WWAV): $9.9 billion
  • Post Holdings (POST): $6.0 billion
  • Dean Foods (DF): $1.7 billion

Performance of Mead Johnson & Company in fiscal 1Q16

Bank of America Merrill Lynch upgraded Mead Johnson & Company’s rating to “neutral” from “underperform.” Mead Johnson reported fiscal 1Q16 net sales of $962.1 million, a decline of 12.1% from the net sales of $1.1 billion in fiscal 1Q15. Sales from Asia, Latin America, and North America and Europe fell by 13.8%, 21.6%, and 2.5%, respectively, between fiscals 1Q15 and 1Q16.

In fiscal 1Q16, its net income and EPS (earnings per share) fell to $72.7 million and $0.39, respectively, compared with $207.4 million and $1.02 in fiscal 1Q15. It reported non-GAAP (generally accepted accounting principles) EPS of $0.87 in fiscal 1Q16, a fall of 20.2% from fiscal 1Q15.

MJN’s receivables and inventories rose by 7.5% and 0.41%, respectively, between fiscals 4Q15 and 1Q16. Its current ratio rose to 2.12x in fiscal 1Q16, compared with 2.07x in fiscal 4Q15.

Projections

Mead Johnson & Company has made the following projections for fiscal 2016:

  • sales to be 0%–2% higher than 2015 sales on a constant dollar basis, or 4%–6% below compared with the prior-year period on a reported basis
  • GAAP EPS in the range of $2.91–$3.03
  • non-GAAP EPS in the range of $3.48–$3.60

For an ongoing analysis of this sector, visit Market Realist’s Consumer Discretionary page.

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