While Mead has noted a slower market for several quarters, it is clear that local and multinational infant formula producers are using more promotion to move excess inventory, Deutsche Bank noted.
"Along with Hong Kong disruption and changing retail landscape, we see these developments as disconcerting and lower our 2015 to 2016 China growth rates," Deutsche Bank analysts said.
The firm lowered sales estimates in 2015 to 0.7% growth from 1.5% growth, and reduced earnings per share to $3.82 from $3.89 this year, with $4.13 earnings per share down from $4.22 in 2016.
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 up 0.31% to $91.06 in afternoon trading Monday.
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, good cash flow from operations and notable return on equity. 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 ($3.99 versus $3.54).
- 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 79.72%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.1%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: MJN Ratings Report