While the firm continues to believe infant formula will remain one of the best growth categories over time, analysts are concerned about near-term trends in China.
"In particular, competitive pricing has dropped to levels management sees as 'somewhat irrational'," analysts at JPMorgan said.
Additionally, issues in Hong Kong are likely to hamper sales growth for much of the rest of 2015, the firm added.
Mead Johnson Nutrition is a global pediatric nutrition company that manufactures, distributes and sells infant formulas, children's nutrition and other nutritional products.
Shares of Mead Johnson Nutrition are down 0.26% to $90.71 in morning trading Thursday.
Separately, TheStreet Ratings team rates MEAD JOHNSON NUTRITION CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate MEAD JOHNSON NUTRITION CO (MJN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins, growth in earnings per share, increase in stock price during the past year and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Food Products industry average. The net income increased by 2.5% when compared to the same quarter one year prior, going from $202.40 million to $207.40 million.
- The gross profit margin for MEAD JOHNSON NUTRITION CO is rather high; currently it is at 66.25%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.95% is above that of the industry average.
- MEAD JOHNSON NUTRITION CO's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MEAD JOHNSON NUTRITION CO increased its bottom line by earning $3.54 versus $3.35 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.54).
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- Net operating cash flow has increased to $274.50 million or 38.91% when compared to the same quarter last year. Despite an increase in cash flow, MEAD JOHNSON NUTRITION CO's cash flow growth rate is still lower than the industry average growth rate of 80.47%.
- You can view the full analysis from the report here: MJN Ratings Report