Multiple allegations rock Mead Johnson Nutrition Co (NYSE:MJN)

Denver, CO, 07/04/2013 - On July 3, 2013, Wohl&Fruchter LLP, a law firm, announced that, Mead Johnson Nutrition Company (NYSE:MJN) is being investigated for potential violations of federal securities laws by company officers. This news came a day after the reports that the company faced probing into the price-fixing violations by Chinese Authorities.

Mead Johnson has been the hardest hit stock among its competitors Abbott Laboratories, Nestle SA, DANONE SA and Dutch cooperative Royal Friesland Campina NV. The stock price of Abbott and Nestle, reacting to the news, moved marginally, whereas Meads plunged 13% from $79.43 on July 1, 2013 to $68.85 on July 3, 2013. The National Development and Reform Commission, China’s economic planning agency, is investigating apossible infringement of anti-monopoly laws. The companies are said to be indulging in anti-competitive practice by adding melamine to baby products in order to price their products higher against competition from imported products. The probe was launched after reported deaths of six babies and the sickening of thousands.

The company in a press release said “We are celebrating 20 years of our presence in China this year and we value our rooted relations we have established with local suppliers, distributors and partners. The company will corporate with the Chinese authorities in the investigation.”

Following the reports, Wells Fargo lowered the rating of the company from “outperform” to “market perform”, changing its target from $88 to $77. One reason, as stated by analysts of Wells & Fargo, was also the slow growth of developing countries that show signs of weakening GDP, thus creating headwinds for Meads, since the companywas attempting to offset its 2014E cost inflation.

As per an analyst at Wells Fargo 30% of Mead Johnson’s sales is derived from China and Hong Kong.

The company plans to pay a dividend on July 5, 2013 and release its second quarter and first half earnings on July 25, 2013.