Mead Johnson Nutrition Company (MJN)
Mead Johnson Nutrition Company (MJN) may not be a household name. Frankly even after reviewing their brands (which you can look over by Clicking Here), I still wasn’t familiar with the company. What I am familiar with is their recent Q4 earnings report which beat on EPS and revenues (72c vs 68c and $981.1M vs $956.32M). MJN’s guidance for 2013 did look to be somewhat below analyst expectations coming in at a range of $3.22-3.30 with analysts consensus being $3.33. It was on that earnings report that MJN gaped significantly higher and came on my radar.
From a technical prospective MJN was coming off a divergent MACD bottom and had digested the first move. The gap took MJN above the 200 day SMA which it continues to hold and while I do subscribe to the idea that all gaps get filled, it certainly doesn’t mean that they get filled right away.
I like having some exposure in the “food” sector and I like MJN’s involvement in child nutrition including products that are for the mother during pregnancy or recently after and in the breast feeding phase. While MJN might not be at an unbelievable value and frankly somewhat different than what I normally look for, I do believe there is upside potential in the name.
There are very mixed reviews in the analyst world regarding the name which include recent downgrades from JP Morgan, Credit Suisse and Miller Tabak and upgrades from Morgan Stanley and Goldman Sachs. From Goldman’s note they mention that they see a rebound in Chinese sales growth in the second half of 2013 and a stabilization in the North American market which includes Latin America which the company believes will provide $1B in sales by 2015. This is a reminder that while a strong US name, MJN has exposure to the world abroad and the growing Latin America and Asian markets. The company still needs to succeed on their business plan and drive sales in those areas but I generally give companies who are there are doing it the benefit of the doubt they will continue.
The way to play MJN? That will depend on your risk tolerance and other holdings. If I had a Dean Foods (DF) (which I also like) then I very well may swap or swap some. I think MJN could be a candidate for a straight share purchase, covered call and put sell or some combination. In the meantime technically speaking I would like this consolidation to continue to hold the 200 Day SMA (represented by the blue box) as the shorter term MA’s catch-up.
If all works out, I think MJN can target the recent highs near $90 and could also exceed those highs.
