UPDATE 2-Mead Johnson profit misses, but sees 2010 sales up

Thu Jan 28, 2010 12:02pm EST

* EPS $0.48 ex-items vs Wall Street view $0.51

* Sees 2010 non-GAAP EPS of $2.30-$2.40 vs view $2.43

* Sales rise 1 pct to $714.4 mln; earnings up 37.9 pct

* Shares up nearly 4 percent (Adds CFO, CEO comments, sales projections, share moves)

By Phil Wahba

NEW YORK, Jan 28 (Reuters) - Baby formula maker Mead Johnson Nutrition Co (MJN.N) reported a smaller-than-expected quarterly profit, but said sales in Latin America and Asia would be robust in 2010 and stabilize in mature markets.

Shares in the maker of Enfamil rose nearly 4 percent.

Mead Johnson said profit attributable to stockholders rose 37.9 percent to $64 million, or 31 cents a share, in the fourth quarter from $46.4 million, or 27 cents a share, a year earlier.

Excluding one-time items, earnings were 48 cents a share. Analysts on average had forecast 51 cents, according to Thomson Reuters I/B/E/S.

JP Morgan analysts attributed the shortfall to higher than expected advertising and promotional expenses.

Sales rose 1 percent to $714.4 million, while analysts had forecast $715.2 million.

Net sales slid 12.3 percent in Europe and North America, in part because of lower birth rates that the company attributed to the economic slowdown and to a loss of market share to rival Abbott Laboratories Inc (ABT.N).

In contrast, net sales rose 12 percent in Asia and Latin America in the last three months of 2009. On a conference call, Mead Johnson Chief Financial Officer Peter Leemputte said he expects that momentum to continue into 2010, with sales in those markets rising "in the double-digits."

In December, Bristol-Myers Squibb Co (BMY.N) completed its split-off of Mead Johnson, which analysts have said could be a prime acquisition target for a company like Switzerland's Nestle AG (NESN.VX) or France's Danone SA (DANO.PA). Danone in September shot down speculation that it was in talks with Mead on a deal.

Chief Executive Stephen Golsby said on the call that he expects the U.S. birth rate to pick up as the economy improves, easing pressure on demand in the coming years.

The company warned of higher commodity prices but forecast that profits would rise in 2010 and that overall sales would rise 7 percent, excluding the impact of exchange rates.

The Glenview, Illinois company forecast profits excluding items in 2010 of between $2.30 and $2.40 per share, below analyst expectations of $2.43, according to Thomson Reuters I/B/E/S. The company earned $2.23 in 2009.

Leemputte said the company's gross margins could shrink by two percentage points this year, in part because of advertising expenses, as well as currency fluctuations. He also said the recent devaluation of the Venezuelan currency could hurt earnings by 5 cents per share in 2010.

Near midday, Mead Johnson shares were up $1.71 or 3.9 percent to $45.71 on the New York Stock Exchange. (Reporting by Phil Wahba in New York and Brad Dorfman in Chicago; Editing by Lisa Von Ahn and Gerald E. McCormick)

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