Mead Johnson (MJN) Q4 Earnings: Disappointment In Store?

Mead Johnson Nutrition Company MJN is scheduled to report fourth-quarter 2016 results on Jan 26, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 1.16%. Further, Mead Johnson’s earnings outpaced the Zacks Consensus Estimate in the past four quarters, with an average beat of 6.10%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Amid a gloomy macro-economic scenario, Mead Johnson reported mixed third-quarter 2016 results. The company witnessed poor sales with all the segments posting weak numbers. Macroeconomic issues in the markets of Brazil, Venezuela and Argentina also played spoilsport. The tough global economic environment combined with low dairy costs hampered growth in the last quarter and may continue to pose challenges going ahead. 

Mead Johnson Nutrition Company Price and EPS Surprise

 

Mead Johnson Nutrition Company Price and EPS Surprise | Mead Johnson Nutrition Company Quote

Foreign exchange fluctuations and a competitive landscape also add to Mead Johnson’s woes. Notably, currency had affected its past quarter results by 4%. Management also claims that it is currently facing stiff competitive challenges in the U.S. which may mar the fourth-quarter performance.

Post third-quarter report, Mead Johnson has been trading below the Zacks categorized Food-Misc/Diversified industry over the last three months. Currently, the stock is down 11.6%, wider than the loss of 2.2% for the broader industry. Management’s lowered 2016 guidance is also disappointing as it extinguishes hopes of recovery anytime soon.

On the brighter side, despite a sluggish Asian segment, the company performed well in China with improvements in both volume and products mix in the past quarter. Management is currently working on strengthening its competitive position in growing channels. This we believe will get reflected in the forthcoming quarter’s results as well.

Nevertheless, Mead Johnson’s Fuel for Growth project played a major role in boosting profits. For the third year in a row, the scheme drove significant savings in selling, general and administrative (SG&A) expenses. Also, lower dairy input costs expanded gross margin at constant exchange rate (CER).

Earnings Whispers

Our proven model does not conclusively show that Mead Johnson is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:  Mead Johnson has an Earnings ESP of -7.14%.That is because the Most Accurate estimate is 78 cents while the Zacks Consensus Estimate is pegged at 84 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Mead Johnson has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:

Histogenics Corporation HSGX has a positive Earnings ESP of 12.77% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Blueprint Medicines Corporation BPMC has an Earnings ESP of +6.85% and a Zacks Rank #2.

Catabasis Pharmaceuticals, Inc. CATB has an Earnings ESP of +5.77% and a Zacks Rank #2.

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Mead Johnson Nutrition Company (MJN): Free Stock Analysis Report
 
Blueprint Medicines Corporation (BPMC): Free Stock Analysis Report
 
Catabasis Pharmaceuticals, Inc. (CATB): Free Stock Analysis Report
 
Histogenics Corporation (HSGX): Free Stock Analysis Report
 
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