Mead Johnson Nutrition’s Stock Falls after 2Q16 Earnings



Stock falls after 2Q16 results

On July 28, 2016, Mead Johnson Nutrition Company (MJN) reported its financial results for 2Q16 and 1H16. The stock fell ~2% after the 2Q16 earnings announcement, with sales missing analysts’ estimates. However, earnings topped estimates by 12% for the quarter. We’ll discuss the results later in this series.

The stock fell another 2% on August 1 and closed at $87.72. The stock rose 0.83% on July 26 when J.P. Morgan upgraded the stock to “overweight” from “neutral.” The firm also increased the stock’s target price to $105 from $85.

So far, the stock has risen by as much as 12% in 2016. It fell 21% in 2015. On August 1, Mead Johnson Nutrition outperformed the Market, as represented by the S&P 500 Index, by 4%.

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Peers in the industry

Mead Johnson Nutrition is a processed and packaged food company based in Glenview, Illinois. It has a market cap of $17.1 billion. It manufactures, distributes, and sells infant formulas, children’s nutrition products, and other nutritional products. Its key brands include Enfamil Premium, Enfapro Premium, Enfalac A+, and Enfamil A+.

Mead Johnson Nutrition’s peers in the industry include private nutrition companies such as Nestlé, Danone, and Abbott Nutrition. Its peers in the food and packaging industry include Campbell Soup (CPB), Flowers Foods (FLO), and General Mills (GIS). So far in 2016, its peers have given the following returns:

  • Campbell Soup has risen 18%.
  • Flowers Foods has fallen 16%.
  • General Mills has risen 24%.

Campbell Soup, Flowers Foods, and General Mills closed at $62.05, $18.01, and $71.63, respectively, on August 1. The Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS) invests 3.1% of its portfolio in Mead Johnson Nutrition. It also invests 2.5% of its holdings in Campbell Soup and 2.7% of its holdings in General Mills. The Consumer Staples Select Sector SPDR Fund (XLP) invests 2.3% of its holdings in GIS.

Series overview

This series will focus on how Mead Johnson Company performed in the second quarter. We’ll look at what caused revenue to decline and discuss segmental contributions to revenue and operating profit for the quarter. We’ll go on to discuss how the company’s earnings benefited in the quarter. We’ll also look at the company’s updated outlook for 2016. Finally, we’ll look at the updated target prices for the stock over the next 12 months.


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