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Mondelez International, Inc. (MDLZ - Analyst Report) beat the Zacks Consensus Estimate for the earnings but missed the same for revenues in the second quarter of 2013. The maker of Oreo cookies and Cadbury chocolates maintained its outlook for organic revenues and earnings for fiscal 2013.

Adjusted earnings of 37 cents per share in the second quarter of 2013 beat the Zacks Consensus Estimate of 35 cents by 5.7%. On a currency-neutral basis, earnings improved 5.6% from the prior-year quarter. The earnings growth was driven by solid organic revenue growth.

Mondelez International focuses on the global food and snacks business of the erstwhile Kraft Foods. The old Kraft Foods was spun off from its North American grocery business into a separate independent company, Kraft Foods Group, Inc. (KRFT - Analyst Report) in October last year.

Revenues & Margins

Net revenue in the quarter improved 0.8% year over year to $8.60 billion. Revenues missed the Zacks Consensus Estimate of $8.63 million by 0.4%. However, organic revenues (excluding impact from acquisitions, divestures and foreign exchange) of $8.73 billion increased 3.8% driven by an increase in emerging markets, favorable volume/mix, strong performance of Power Brands and increase in global market share.

Organic top line growth was however much lower than the company's long-term target range of 5%-7% growth. Lower coffee pricing, capacity constrains in a number of markets and continued weakness in its gum business hurt organic revenue growth in the quarter. Lower coffee prices adversely affected top line growth by around 0.8 percentage points (pp) while capacity constraints created a headwind of 0.2 pp. Volume/mix benefited the top line by 3.6 pp while pricing added 0.2 pp.

Mondelez’s Power Brands grew 7.9% in the quarter while revenues from emerging markets were up 9.7% mainly due to strong growth in BRIC markets.

Among the food categories, biscuits, chocolates and coffee were up in the quarter, while the gum and candy business was down. The company’s gum business has been down since the last few quarters, mainly in the developed nations.

Adjusted gross margins declined 20 basis points (bps) in the quarter to 37.8% as gains from volume/mix and pricing were offset by headwinds from higher input costs.

Adjusted operating income declined 9.3% year over year to $1.0 billion on a constant currency basis due to higher spending for advertising, consumer support, sales capabilities and route-to-market expansion in emerging markets. Adjusted operating margin declined 1.8 basis points in the quarter to 11.4%.

Segment Discussion

Latin America: Revenues declined 0.1% to $1.34 billion. Organically, revenues increased 9.6%, driven largely by price increases but partially offset by volume/mix. Brazil was up in double digits, driven by volume/mix gains and higher pricing. Adjusted segment operating income declined 23.5% on a constant currency basis to $166 million due to higher investments in sales capabilities and route-to-market expansion.

Asia Pacific: Revenues grew 1.5% to $1.24 billion. Organically, revenues increased 3.3% driven by volume/mix gains. Double-digit growth in emerging markets of China, India and Philippines was offset by mid single-digit decline in the developed markets, due to weakness in gum and candy. Adjusted segment operating income decreased 13.8% on a constant currency basis to $137 million.

Eastern Europe, Middle East & Africa: Revenues grew 7.7% to $1.04 billion. Organically, revenues increased 11.3% as volume/mix gains were offset by lower coffee pricing. Russia grew mid teens despite the pricing pressure due to strong volume/mix performance. Adjusted segment operating income declined 0.7% on a constant currency basis to $143 million due to higher investments in sales capabilities and advertising, which also hurt profits.

Europe: Revenues declined 1.3% to $3.27 billion. Organically, revenues increased 0.2% as volume/mix gains mainly in chocolates, coffee and biscuits were offset by lower coffee pricing and weakness in gum and cheese.  Adjusted segment operating income declined 7.6% on a constant currency basis to $401 million.

North America: Revenues grew 1.1% to $1.70 billion. Organically, revenues increased 2.3% driven by solid biscuit sales in the U.S. However, the gum business continued to decline. Adjusted segment operating income rose 0.4% on a constant currency basis to $226 million due to lower gross margins resulting from weak gum sales.  

Financial Update

The company recently hiked its third quarter dividend by 8% to 14 cents per share. The dividend is payable on Oct 15, 2013, to stockholders of record as of Sep 30, 2013.  This marks the first dividend hike since 2008.

The company recently increased its share repurchase authorization to $6 billion through 2016, up from the previous authorization of $1.2 billion.  The company intends to repurchase $1-2 billion of shares annually.

2013 Outlook

Mondelez retained its 2013 outlook for revenues and earnings. The company expects earnings per share in the range of $1.55–$1.60 per share.

For 2013, Mondelez continues to expect its organic top line to grow at the lower end of its long-term range of 5%-7%. However, top line growth is expected to accelerate in the second half driven by Mondelez’s growth initiatives. The company also expects its margins to improve in the second half of the year.

The stock carries a Zacks Rank #4 (Sell).

Consumer staples stocks that are worth considering include B&G Foods Inc. (BGS - Snapshot Report), and Dole Food Company Inc. .  Both B&G Foods and Dole Food Company carry a Zacks Rank #1 (Strong Buy).

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