Mead Johnson (MJN) Investors Sense Opportunity After China Lifts One-Child Ban But Enthusiasm Tapered
Get Alerts MJN Hot Sheet
Rating Summary:
3 Buy, 15 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
Join SI Premium – FREE
Big news today in China is a move by the communist country to lift its one-child policy. The country will now allow all couples to have two children. The policy of one child has been in place since the late 1970s, although in 2013 the country allowed some families to have two children after meeting certain conditions. Today's move is seen as part of an effort to stem China's shrinking labor pool.
Investors, smelling short and long-term opportunity, are on the lookout for companies that will see a financial windfall from the news.
The announcement is expected to have the most immediate impact on baby formula maker Mead Johnson (NYSE: MJN). 50% of the company's sales comes from Asia, while 30% of its pediatric nutrition sales come from China and Hong Kong.
After trading up more than 5% initially on the headlines, shares are now up 3.5% as some analysts have poured cold water on the real size of the opportunity. Credit Suisse analyst Robert Moskow said while the announcement came earlier than expected, most expected China would soon be officially lifting its one-child policy.
Moskow said in a best case scenario the change in policy would boost Mead's sales by just 2% per year. In getting to this number, the analyst highlighted December 2013 research from Credit Suisse’s economics team in China. They estimated that abolishing the one-child policy would increase the number of births in China by 8.3 million through 2020, equivalizing to an increase of 7% per year. "If Mead’s business in China were to improve by a similar rate, Mead’s sales would theoretically grow 2% faster each year and EPS would grow 6% faster due to the overhead leverage," he commented.
China-based infant formula maker Synutra International (NASDAQ: SYUT) is also expected to benefit from the news. Its shares are up 8.5% today to $6.24.
Longer-term, companies including Apple, Inc. (NASDAQ: AAPL), McDonald's (NYSE: MCD), Yum! Brands (NYSE: YUM) are expected to benefit from China's expanding population. Yum! Brand, which has had its share of successes and struggles in China, is currently in the process of spinning-off its China operations into an independent, publicly-traded company.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- META to capture largest share of users, SNAP to benefit from ad budget shifts - Canaccord Genuity weighs in on TikTok ban
- Keurig Dr Pepper (KDP) PT Raised to $39 at Jefferies
- Bristol-Myers Squibb Co. (BMY) PT Lowered to $64 at Truist Securities
Create E-mail Alert Related Categories
Analyst Comments, Insiders' Blog, Trader TalkRelated Entities
Credit SuisseSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!