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- Mead Johnson Nutrition CO (NYSE: MJN) shares have declined 20.95 percent year to date, hitting a low of $69.64 on September 29.
- Credit Suisse’s Robert Moskow has downgraded the rating on the company from Outperform to Neutral, with a price target of $86.
- Moskow believes that the recent rally in the share price has made the risk-reward profile less attractive, while expecting a “long road to recovery” for the company.”
According to the Credit Suisse report, “With management calling 2016 a "transition year" and 2017 a year for "building momentum," we expect a long wait before the company can return to a pattern of double-digit EPS growth.”
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Analyst Robert Moskow expressed concern regarding China becoming “an opaque and moving target,” given the competitive actions, unpredictable regulatory actions and the channel transitioning to e-commerce.
“As a result, it is very difficult to determine when (or if) the company's accelerated investment will begin to bear fruit,” Moskow stated.
Moskow also expressed concern regarding the lack of opportunities for SG&A opportunities, while mentioning that Mead Johnson had “admitted that it allowed its overhead costs to escalate too high.”
Management also explained that its hybrid consumer/medical products model intrinsically needs higher spending. Therefore, the company’s restructuring initiative focuses only on $400 million of the cost structure.
However, Moskow also said that “management demonstrated a greater sense of urgency to create shareholder value with a $1B accelerated share repurchase program and openness toward expanding operating margins beyond 24 percent.”
The company has also announced its intention to launch a “super high premium” product in China to narrow its portfolio gap.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.