Sell Mead Johnson Nutrition (MJN)

Yesterday, January 26, Mead Johnson Nutrition (MJN) reported fourth quarter earnings of 52 cents a share, a penny above Wall Street estimates, and revenue of $911.3 million, above the Wall Street consensus of $894.04 million.

On the news the stock closed up at $74.01. That–$74 a share–was the price I set for an exit in the aftermath of the death of a baby in Missouri that had consumed the company’s Enfamil baby formula from a Cronobacter infection. To me the stock is now a sell. (The shares are a member of my Jubak’s Picks 12-to-18 month portfolio http://jubakpicks.com/the-jubak-picks/  )

The important issues are valuation and timing. Read more

The Centers for Disease Control and the Food and Drug Administration have concluded that there is no evidence of Cronobacter contamination during the manufacture or shipping of Mead Johnson Nutrition’s (MJN) Enfamil baby formula. Shortly before Christmas a baby in Missouri that had consumed the formula had died from the bacteria. The two agencies also concluded that the formula involved in the illness of another baby in Illinois was from a different batch than in Missouri.

“Based on the test results to date, there is no need for a recall of the infant formula,” the agencies said in the joint statement. Wal-Mart (WMT), Supervalue (SVU) and other retailers had pulled the product from their shelves on December 22 after reports of the infant’s death. The tests by the Centers for Disease Control and the Food and Drug Administration found traces of the bacteria in the bottled water used to prepare the formula and in an opened container of the Enfamil product, but not in the sealed containers from the factory.

This is about as good an outcome as possible for Mead Johnson Nutrition. The stock fell 14.6% on the news of the infant’s death and on reports that Wal-Mart and other retailers had pulled the product. Shares have since recovered but they’re still down 6.4% from the closing price on December 21 before the news.

The question for investors is Now what happens to the shares? Read more

Update Mead Johnson Nutrition (MJN)

There’s nothing more heartbreaking and shocking than the death of a child.

Shares of Mead Johnson Nutrition (WMT) dropped like a stone yesterday—the stock was down 10% for the day—and has dropped another 5% today as of 1:15 p.m. New York time—on news that an infant given the company’s Enfamil baby formula had died from a bacterial infection and that Wal-Mart (WMT), Kroger (KR), Walgreen (WAG), and Supervalue (SVU) had pulled cans of the product from their shelves.

The markets are operating on a dearth of information and an abundance of rumors. Read more

2012 is the year of the dragon. Because the dragon, the icon of China’s emperors, symbolizes power and wealth, families in China see children born in a dragon year as especially fortunate. Dragon years, historically, produce a mini baby boom with about 5% more children born in a dragon year. Add that to the echo from China’s own baby boom and the loosening of government restrictions on family size and China is projected to see increasing birth rates that peak around 2016.

That’s led to a stock market boost in the shares of companies that are likely to tap into the baby bump. Chinese companies such as Inner Mongolia Yili Industrial Group (baby formula), Hengan International Group (baby diapers), and Boshiwa International Holding (retailer of kids clothes) have been tagged by China-based analysts as beneficiaries of the baby bump.

But I think Mead Johnson Nutrition (MJN) is an even better bet. Read more