Mead Johnson profit beats Street; shares rise

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(Global Markets) - Mead Johnson Nutrition Co (MJN.N), the maker of Enfamil baby formula, posted a slightly higher-than-expected quarterly profit but said a contamination scare could mean lower market share at least through the 2012 first half.

In December, Wal-Mart Stores Inc (WMT.N) and other retailers pulled certain packages of Enfamil off store shelves following the death of an infant who drank the formula.

A government investigation found no trace of contamination in sealed Enfamil packages and no reason for a recall. That took Mead Johnson out of the line of fire, but not before damaging its brand.

"While it is still early days ... that issue is going to have a meaningful downward impact on our business in the United States," Mead Johnson Chief Executive Steve Golsby said on Thursday. "While there was no noticeable impact on our fourth-quarter sales, given the late December timing, we expect to see lower market share potentially into the third quarter of this year."

The company said it was spending heavily on an advertising campaign meant to restore trust in its brand.

It forecast 2012 earnings below Wall Street estimates, but many investors were prepared for a weak outlook, said RBC Capital Markets analyst Edward Aaron.

"The range provided is consistent with our assessment of buy-side expectations heading into earnings," Aaron said in a research note.

Mead Johnson said it expects a profit of $3.00 to $3.10 per share this year. Analysts' average estimate is $3.18, according to Thomson Global Markets I/B/E/S. The forecast assumes higher commodity and packaging costs and net sales growth of 7 percent to 9 percent.

For the fourth quarter, net sales rose 13.4 percent to $911.3 million, above the $895.8 million analysts had expected. Sales in Asia and Latin America jumped 17 percent, while sales in North America and Europe rose 3 percent.

Net income for the quarter was $85.6 million, or 42 cents per share, down from $99.6 million, or 48 cents, a year earlier.

Excluding certain items, earnings came to 52 cents per share. Analysts on average were expecting 51 cents, according to Thomson Global Markets I/B/E/S.

Mead Johnson shares were up $1.19, or 1.6 percent, at $73.79 in midday trading on the New York Stock Exchange.

(Reporting By Martinne Geller and Phil Wahba; editing by Mark Porter and John Wallace)