Tuesday February 19, 2013
by Gavin Graham, contributing editor Internet Wealth BuilderMead Johnson Nutrition (
MJN), one of the largest global manufacturers of infant formula under, is a play on one of the strongest and most predictable factors in economic life, namely demography.
The company has well-known brands such as Enfamil, Sustagen, and Enfagrow. Mead Johnson, was spun off from its parent, drug manufacturer Bristol Myers Squibb, in 2009. Since then it has delivered strong and consistent growth in revenues and earnings.
Mead Johnson is one of the most global companies listed in North America, selling more than 70 products in 50 countries around the world. And while birth rates in some developed countries have fallen, this is emphatically not the case in most emerging markets.
Interestingly, Mead Johnson is experiencing sales growth even in China, despite the one child policy. Other Asia/Latin America markets had organic revenue growth in the mid-teens in the fourth quarter of 2012.
The combination of strong revenue growth and price insensitive products has made Mead Johnson an attractive investment over the period since its spin-off; the stock price is up 75% over the last three years.
Generating over $200 million of free cash flow each year, Mead Johnson has paid down $500 million of the $2 billion in debt it inherited from Bristol Myers four years ago.
Action now: Mead Johnson is a Buy for its exposure to the fast-growing emerging markets' middle class, its ability to raise prices for its products even in a deflationary environment, and for its strong cash generation.
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