Dallas, Texas 07/21/2015 (Financialstrend) – Mead Johnson Nutrition CO (NYSE:MJN) was a big disappointment when it posted weaker than expected second quarter earnings. The company is apparently feeling the effects of a slowdown in China that has hit the greater stock market. Declining sales in this market has already forced the company to revise its full year guidance to the downside.
Slow growth in China and in emerging markets is a point of concern for Mead Johnson Nutrition CO (NYSE:MJN), which has posted a 7% preliminary drop in second quarter sales. It is not the first time that Mead Johnson finds itself in a tight spot with regards to its operations in China. The company has been at the center of an antitrust probe with regards to its formula safety and most recently faced tighter trade inventory levels.
Hong Kong sales have also been a disappointment attributed to the recent visa-allowance standoff at the border with China. Sales in Hong Kong may have stabilized in the second quarter but still fell short of estimates.
Pricing Power under Pressure
The company’s prospects have further been hurt by dairy costs trending at five-year lows, a move that has prompted aggressive discounting in Latin America, and Asia. Lower dairy costs have significantly reduced Mead Johnson Nutrition CO (NYSE:MJN) pricing power as the company continues to generate reduced profits attributed to a strengthened dollar on sales carried abroad. Competition is also rife on rivals offering aggressive discounts.
Slowdown in key markets especially China has already forced the company to issue a new guidance update for the second quarter. Mead Johnson Nutrition CO (NYSE:MJN) expects its earnings per share to come in at 76 cents a share against analysts’ estimates of 85 cents a share. For the full year, the company expects its earnings to come in at between $3.63 and $3.78 a share, against prior guidance of between $3.90 and $4 a share