Why Mead Johnson Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of children's nutrition specialist Mead Johnson were looking healthier today, gaining as much as 13% after posting strong quarterly results.

So what: The maker of infant formula and other nutrition products beat estimates on both top and bottom lines, posting a $0.72 profit per share when analysts were expecting $0.68. The company's outlook also seemed to surprise the market, as Mead Johnson has had problems in China recently after raising prices on a popular formula. Still, its EPS forecast of $3.22 to $3.30 is slightly below analysts' target at $3.33.

Now what:Mead Johnson had also been concerned about a lower birth rate in North America, and the subsidizing of breast pumps under the Affordable Care Act could disincentivize further formula purchases. Based on forward estimates, this stock is not cheap at a 2013 P/E of 23, and growth seems to be slowing as sales rose only 8% in the fourth quarter. I'd wait for signs that conditions are improving before getting on board.

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The article Why Mead Johnson Shares Popped originally appeared on Fool.com.

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