Zacks_Analysts' Blog : Mead Claims Infant Food to Be Clean - Analyst Blog

Mead Johnson Nutrition Company (MJN) said that its Enfamil Premium Newborn infant formula, which was suspected to have killed the 10-day-old baby boy in Missouri, has gone through another test and has been found to be innocent. The test conducted by the company on the infant formula was tied to the same sample used by US Food and Drug Administration (FDA). However, the results of FDA are still pending.

The newborn baby died apparently of a rare bacterial infection soon after it was fed by the powdered infant formula called Enfamil Premium Newborn infant formula. Another baby in Missouri was detected positive for the bacteria, but survived after preliminary treatment.

The bacteria is said to be found in dried milk powder. As a measure of precaution, Mead Johnson Nutrition said all batches of the Newborn Infant dried milk formula are tested for the bacteria before they are shipped.

Meanwhile, major retailers reacted to the incident by pulling back the dried milk formula from their store shelves. While Walmart Stores Inc. (WMT) was the first to recall the infant formula of that particular batch, Supervalu Inc. (SVU), Walgreen Co. (WAG), Kroger Co. (KR) and Safeway Inc. (SWY) also removed 12.5-ounce cans of Enfamil Newborn with the lot number ZP1K7G from various stores across the country as a precaution. The batch that was pulled probably will not be made available for sale again until the FDA makes a final decision based on its testing.

This kind of an allegation could prove costly to a company which is highly focused in infant foods, and which is expected to maintain 100% perfect safety standards. Specially, Walmart recalling back the product from its store shelves could lead the company’s shares to tumble.

However, the absence of bacteria re-affirmed the results the company got before it shipped the batch of Enfamil Premium Newborn powdered formula. The U.S. Centers for Disease Control and Prevention in Atlanta commented that it could be coincident and the infection could also have been caused by the filtered water used to prepare the food.

The “Enfa” brands, which include Enfamil, comprised for 79% of Mead Johnson’s $3.14 billion in fiscal 2010 revenue. It is also the world’s leading brand franchise in pediatric nutrition based on retail sales.

The company said all of its infant formula products undergo more than 2,300 quality tests and checks to ensure they meet standards set by the World Health Organization and FDA.

While Walmart, Supervalu, Safeway and Walgreen all hold a Zacks #3 rank, implying a short term ‘Hold’ rating, Kroger holds a Zacks #2 rank that implies a short term ‘Buy’ rating.