Mead Johnson Nutrition (MJN – Free Report) is one of the best known names in the consumer market, at least if you are focused on the infant segment. Their key products focus on infant formulas and children’s nutrition, with Mead Johnson being probably most famous for its Enfamil product line.
However, the outlook for this company’s stock isn’t as impressive as its product lineup, as the company has seen shaky trading for shares of MJN in the past month. The election in particular seems to have had a negative impact on shares of this company, and the same can be said for many of Mead Johnson’s counterparts in the consumer staples market too.
That is because the overall environment for consumer staples stocks is pretty weak. This is driven in part by surging yields– which makes higher dividend paying securities less attractive– and also by sector rotation trends. Investors are clearly piling into financial, industrial, and oil names as of late, pulling out of names in the utilities, staples, and REIT worlds in the process.
As further evidence of this trend, consider the performance of the consumer staples ETF (XLP) relative to the market at large. The segment was outperforming the broad markets by a wide margin to start the year, roughly doubling the S&P 500’s return in the first six months of 2016. The sector has been on a downward trend since then, and in the past month, XLY has tumbled about 4%, easily underperforming the S&P 500’s 4.4% gain in the same time period and suggesting that the run from earlier in the year is over.
But beyond broad sector worries, there are also company specific reasons why MJN might be a weak pick right now. This is clear if we look to recent earnings estimate revisions of the stock, and analyst expectations for the company’s earnings in the near term.
We actually haven’t seen any estimate revisions higher for the company in the past two months, for the current quarter, current year, or even the next year time frame. This has had a devastating impact on the consensus estimate, and is part of the reason why current quarter and current year EPS growth numbers are have come down quite a bit in recent weeks.
In fact, the current quarter consensus estimate has fallen by about 5.6% in the past two months, while the full year consensus has declined by about 1.4% in the same time frame. No wonder we have the industry in the bottom 20% overall, and the stock as a Zacks Rank #5 (Strong Sell), with an outlook that calls for more underperformance in the future.
Clearly, the staples market is a weak one these days, so investors should avoid this area. One spot to look instead this holiday season is the consumer discretionary world, as there are several better picks in this market. One industry to watch in particular could be the gaming space, as this segment is highly discretionary and it has a top 20% industry rank too.
While there are several quality picks in this market, one to focus in on could be Las Vegas Sands (LVS – Free Report) ). This company also pays out a decent dividend, but it hasn’t been as impacted by rate worries thanks to its great prospects due in part to its quickly-growing China division.
You can read more about the buy case for LVS in the recent Bull of the Day articleI wrote up on the company. But either way, you should note that LVS has a Zacks Rank #1 (Strong Buy) rating, so it looks to be a far better choice for investors in the consumer market, at least when compared to MJN and other staples stocks in the near term.
More Stocks to Sell. Now.
Beyond our Bear Stock of the Day, today’s list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, you should consider removing them immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.