It has been about a month since the last earnings report for Mead Johnson Nutrition Company . Shares have added about 20.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Mead Johnson Nutrition Company reported fourth-quarter 2016 adjusted earnings per share (EPS) of $0.78, missing the Zacks Consensus Estimate of $0.83 by 6%. However, adjusted earnings were in line with the prior-year quarter figure.
Full-year adjusted earnings came in at $3.40 per share, down 1.2% year over year. The figure also missed the Zacks Consensus Estimate of $3.45 by 1.4%.
Including the impact of certain one-time items, reported net earnings were $0.91 per share, up 35.8% year over year. Full-year net earnings were $2.92 per share, highlighting an increase of 10.7%.
Net Sales
Net sales in the reported quarter grossed $901.6 million, down 6.7% year over year (down 3% year over year at CER, or constant exchange rate). The top line also missed the Zacks Consensus Estimate of $930 million by 3.1%.
Full-year revenues came in at $3.74 billion, almost in line with the Zacks Consensus Estimate of $3.77 billion.
Sales in the reported quarter were affected by 6% lower volume and a 4% unfavorable foreign exchange rate impact. However, fourth-quarter sales were supported by a 3% benefit from favorable price mix.
Segments in Detail
Currently, the company has three reportable segments – Asia, Latin America and North America/Europe.
Sales in Asia (representing 48% of total sales) declined 7% year over year (down 4% at CER) to $463.9 million. While poor volume affected this segment’s revenues by 5%, unfavorable foreign exchange rate impacted sales by 3%. However, China experienced strong sales growth, reflecting positive momentum from new product launches and recovery of prior-quarter customs clearing delays. Sales in other Asian markets, including the Philippines, were hampered by continued adverse market dynamics.
In Latin America (17%), sales declined 8% year over year (up 4% at CER) to $156.3 million. While, foreign exchange in this segment hurt growth by 12%, primarily in Argentina and Mexico, volume dented sales by 10%. Nevetheless, positive pricing gains in the overall segment was offset by volume losses and suspended shipments to Venezuela. Excluding the impact of suspended shipments to Venezuela, constant currency sales growth was 4%.
In North America/Europe (35%), sales dropped 6% to $308.4 million, due to the growth of foreign exchange and volume marring sales by 1% and 8%, respectively. Within this segment, the company experienced a continued weak market share in the U.S. and increased competitive activities. However, in the reported quarter, its market share position strengthened in Canada.
Margins
Adjusted gross margin at CER during the reported quarter was 64%, up 10 basis points (bps) on the back of lower dairy input cost.
Adjusted operating margin improved 66 bps year over year to 27.7%, on account of a 6% drop in adjusted selling, general and administrative expenses. This implies a 2.7% drop in advertising and promotion expenses and 21% decline in research and development expenses.
Balance Sheet and Cash Flow
Mead Johnson exited the year with cash and cash equivalents of $1.79 billion, compared with $1.70 billion in the prior-year period. Long-term debt was $2.97 billion at the end of 2016, which was a slight drop from $2.98 billion recorded in 2015. The company generated operating cash flow of $691.6 million for 2016, compared with $909.9 million in the prior year.
2017 Guidance
Mead Johnson has issued its guidance for 2017. The company expects change in net sales in the range of -3% to 0% compared with 2016 on a reported basis and in the range of -1% to +2% compared with 2016 on CER basis. Management also expects 2017 reported EPS in the band of $3.05–$3.20 and non-GAAP EPS in the range of $3.35–$3.50 on a CER basis.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted 9.26% downward due to these changes.
VGM Scores
At this time, Mead Johnson's stock has a nice score of 'B' on growth and the momentum front. However, the stock was allocated a grade of 'F' on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.
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Why Is Mead Johnson (MJN) Up 20.3% Since the Last Earnings Report?
It has been about a month since the last earnings report for Mead Johnson Nutrition Company . Shares have added about 20.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Mead Johnson Nutrition Company reported fourth-quarter 2016 adjusted earnings per share (EPS) of $0.78, missing the Zacks Consensus Estimate of $0.83 by 6%. However, adjusted earnings were in line with the prior-year quarter figure.
Full-year adjusted earnings came in at $3.40 per share, down 1.2% year over year. The figure also missed the Zacks Consensus Estimate of $3.45 by 1.4%.
Including the impact of certain one-time items, reported net earnings were $0.91 per share, up 35.8% year over year. Full-year net earnings were $2.92 per share, highlighting an increase of 10.7%.
Net Sales
Net sales in the reported quarter grossed $901.6 million, down 6.7% year over year (down 3% year over year at CER, or constant exchange rate). The top line also missed the Zacks Consensus Estimate of $930 million by 3.1%.
Full-year revenues came in at $3.74 billion, almost in line with the Zacks Consensus Estimate of $3.77 billion.
Sales in the reported quarter were affected by 6% lower volume and a 4% unfavorable foreign exchange rate impact. However, fourth-quarter sales were supported by a 3% benefit from favorable price mix.
Segments in Detail
Currently, the company has three reportable segments – Asia, Latin America and North America/Europe.
Sales in Asia (representing 48% of total sales) declined 7% year over year (down 4% at CER) to $463.9 million. While poor volume affected this segment’s revenues by 5%, unfavorable foreign exchange rate impacted sales by 3%. However, China experienced strong sales growth, reflecting positive momentum from new product launches and recovery of prior-quarter customs clearing delays. Sales in other Asian markets, including the Philippines, were hampered by continued adverse market dynamics.
In Latin America (17%), sales declined 8% year over year (up 4% at CER) to $156.3 million. While, foreign exchange in this segment hurt growth by 12%, primarily in Argentina and Mexico, volume dented sales by 10%. Nevetheless, positive pricing gains in the overall segment was offset by volume losses and suspended shipments to Venezuela. Excluding the impact of suspended shipments to Venezuela, constant currency sales growth was 4%.
In North America/Europe (35%), sales dropped 6% to $308.4 million, due to the growth of foreign exchange and volume marring sales by 1% and 8%, respectively. Within this segment, the company experienced a continued weak market share in the U.S. and increased competitive activities. However, in the reported quarter, its market share position strengthened in Canada.
Margins
Adjusted gross margin at CER during the reported quarter was 64%, up 10 basis points (bps) on the back of lower dairy input cost.
Adjusted operating margin improved 66 bps year over year to 27.7%, on account of a 6% drop in adjusted selling, general and administrative expenses. This implies a 2.7% drop in advertising and promotion expenses and 21% decline in research and development expenses.
Balance Sheet and Cash Flow
Mead Johnson exited the year with cash and cash equivalents of $1.79 billion, compared with $1.70 billion in the prior-year period. Long-term debt was $2.97 billion at the end of 2016, which was a slight drop from $2.98 billion recorded in 2015. The company generated operating cash flow of $691.6 million for 2016, compared with $909.9 million in the prior year.
2017 Guidance
Mead Johnson has issued its guidance for 2017. The company expects change in net sales in the range of -3% to 0% compared with 2016 on a reported basis and in the range of -1% to +2% compared with 2016 on CER basis. Management also expects 2017 reported EPS in the band of $3.05–$3.20 and non-GAAP EPS in the range of $3.35–$3.50 on a CER basis.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted 9.26% downward due to these changes.
Mead Johnson Nutrition Company Price and Consensus
Mead Johnson Nutrition Company Price and Consensus | Mead Johnson Nutrition Company Quote
VGM Scores
At this time, Mead Johnson's stock has a nice score of 'B' on growth and the momentum front. However, the stock was allocated a grade of 'F' on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.