The Dividend Daily

Nutrition company, Mead Johnson Nutrition CO(MJN) may have seen declines in 2012, but will the new year bring a recovery for the company?

The Glenview, IL based company surely had a somewhat rough year in 2012. Just before 2012 began, in late December 2011, a Missouri infant was reported dead after becoming sick from a bacterial infection from a formula produced by MJN. Before the new year came, two more infant deaths were reported from the same infection. Although the FDA was unable to find proof that the MJN product was the cause of the three infant deaths, the company still began 2012 with bad press and many consumers hesitate of the company’s brands.

Around this time, the company increased their 26 cent quarterly dividend by 13 percent to 30 cents quarterly.

In February 2012, the company was faced with even more bad press, which resulted in the stock price falling over 4 percent. A Chinese magazine reported that MJN’s baby formula contained a substance called vanillin, which reportedly was an additive for babies, and was reported to be harmful for babies liver and kidneys.

By the summer, the company saw its shares fall again by nearly 2 percent. MJN was seeing a decline in their market share in China, which is an essential market for the company. A competitor in the country had released a major promotion on nutritional products with prices so low, that MJN was having a difficult time competing.

In October, the company released its third quarter earnings report, which revealed a decline of 9 percent. MJN reported that this decline was a direct result of the rising competition in China, as well as sales declines in North America and Europe. The company also blamed a decline in births within the North America and Europe segments as a cause for the reduced sales.

It is no doubt that 2012 wasn’t a great year for Mead Johnson Nutrition, but there may be hope for a recovery in 2013. If MJN can manage to stay away from bad press and maintain an adequate market share in essential markets, the company should be able to see increased sales in the new year.

The company’s well-known brands and international selling relationships should benefit the company’s sales recovery and help the stock price recover from its YTD decline of over 5 percent.

Although MJN reported that low birth rates in 2012 hurt the company, it is possible that high profile expected births in 2013 including the recent announcements of Kim Kardashian and Kanye West and William and Kate’s pregnancies could cause a pregnancy trend in 2013.

Mead Johnson shares were down 46 cents, or -0.76% during Monday morning trading.

The Bottom Line
Despite its troubles in 2012, MJN is still a well-known nutritional provider and is likely to rebound in the new year. Baby formula is big business around the globe and sells at high premiums. With MJN’s established market share around the world, they have great opportunity to succeed.

(MJN) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.

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