Mead Johnson Nutrition Company Earnings: Margins Suffer as Costs Rise, Profit Falls

Rising costs hurt S&P 500 (NYSE:SPY) component Mead Johnson Nutrition Company (NYSE:MJN) in the fourth quarter as profit dropped from a year earlier. Mead Johnson Nutrition provides pediatric nutrition and related products which help improve the health and development of infants and children around the world.

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Mead Johnson Nutrition Company Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for the processed and packaged goods company fell to $85.6 million (42 cents per share) vs. $99.6 million (48 cents per share) a year earlier. This is a decline of 14.1% from the year earlier quarter.

Revenue: Rose 13.4% to $911.3 million from the year earlier quarter.

Actual vs. Wall St. Expectations: MJN reported adjusted net income of 52 cents per share. By that measure, the company beat the mean estimate of 51 cents per share. Analysts were expecting revenue of $897.9 million.

Quoting Management: “We delivered $0.52 in non-GAAP earnings in the fourth quarter of 2011, largely in line with our earlier expectations,” said Chief Executive Officer Stephen W. Golsby. “On a full year basis, sales grew at a record rate of 17 percent with non-GAAP EPS up 15 percent. We achieved exceptional double-digit sales growth in Asia/Latin America. The North America/Europe segment grew in the low single-digits even as births continued to decline in these developed markets. We continued to increase investments in demand-generation activities to support our profitable growth. In addition, we achieved a record level of productivity, which helped reduce the impact of higher commodity costs. In 2011, we completed our SAP installation and shared service transition on time and for the first time in our history have a common global, and fully independent, IT platform. Our exceptional financial performance continues to reflect our strong global growth strategy, and we expect that 2012 will be another successful year for Mead Johnson.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 16.2%, with the biggest boost coming in the second quarter when revenue rose 22% from the year earlier quarter.

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the third quarter, net income rose 36.4% from the year earlier, while the figure increased 8.8% in the second quarter, 16.3% in the first quarter and 55.6% in the fourth quarter of the last fiscal year.

The company has now topped analyst estimates for the last four quarters. It beat the mark by one cent in the third quarter, by 3 cents in the second quarter, and by 5 cents in the first quarter.

Gross margin shrank 1.3 percentage points to 61.1%. The contraction appeared to be driven by increased costs, which rose 17.2% from the year earlier quarter while revenue rose 13.4%.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the first quarter of the next fiscal year has moved down from 84 cents a share to 81 cents over the last ninety days. The average estimate for the fiscal year is $2.77 per share, down from $2.79 ninety days ago.

Competitors to Watch: Synutra Intl., Inc. (NASDAQ:SYUT), Feihe International Inc (NYSE:ADY), Wimm-Bill-Dann Foods OJSC (NYSE:WBD), Dean Foods Company (NYSE:DF) and Lifeway Foods, Inc. (NASDAQ:LWAY).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

 

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com