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Mondelez (MDLZ) Looks Appetizing: Stock Up 15% in 3 Months

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Mondelez International, Inc. (MDLZ - Free Report) has been benefiting from a focus on its chocolate and biscuit business. Also, strength in emerging markets and pricing has been working well for the company amid rising cost inflation and foreign currency headwinds.

Shares of this Zacks Rank #2 (Buy) company have risen 15.4% in the past three months compared with the industry’s growth of 11.5%.

Let’s delve deeper.

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Focus on Core Businesses

Mondelez has been expanding its snacking category in particular. As consumers prefer snacking over traditional meals, the company’s core categories — chocolates and biscuits — have historically depicted resilience to economic downturns and pricing actions. Consumers in developed countries consider chocolates and biscuits as affordable indulgences and one of the most-valued snacking products.

To this end, Mondelez has been keen on expanding its business through acquisitions. In its third-quarter earnings release, the company noted that it closed the Ricolino buyout, which is expected to double the size of its Mexico business. In August 2022, it closed the buyout of Clif Bar.

Management announced incremental investments in the Cocoa Life program and expanded its target to source all cocoa volumes from Cocoa Life by 2030. MDLZ concluded the integration of Chipita S.A. business, which was acquired in January 2022 and is a major producer of sweet and salty snacks in Central and Eastern Europe. Contributions from this acquisition boosted net revenues in the quarter under review.

The company also inked a deal to divest its developed-market gum business (in the United States, Canada and Europe, excluding France) to Perfetti Van Melle Group, a renowned European maker of gum and confectionery products. The strategy aims at generating 90% of the company’s revenues from chocolates and biscuits (including baked snacks).

Emerging Market Strength & Pricing

Mondelez remains encouraged by the underlying emerging market strength. In the third quarter of 2022, revenues from emerging markets increased 19.7% to $3,094 million while rising 24.4% on an organic basis. Management noted that Brazil, Mexico, Western India, the Middle East and North Africa delivered a solid performance.   

Robust pricing actions have been aiding MDLZ. In the third quarter of 2022, pricing actions boosted organic net revenue growth and offered partial respite to the company’s adjusted gross profit margin and adjusted operating margin, which were otherwise hurt by cost inflation and an adverse mix.

In its third-quarter earnings release, Mondelez stated that to mitigate the impact of input cost inflation, it has implemented price increases across key markets, including Europe. Mondelez also revealed plans to implement another round of price increases worldwide, including the United States, which is likely to be effective from December 2022.

We believe that the aforementioned upsides are likely to help Mondelez counter challenges like input cost inflation. For 2022, management expects organic net revenue growth of more than 10%. Further, MDLZ envisions a 10% increase in adjusted earnings per share at cc.

Other Food Stocks to Consider

Some other top-ranked stocks are Conagra Brands (CAG - Free Report) , Campbell Soup (CPB - Free Report) and McCormick & Company (MKC - Free Report) .

Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank of 2. CAG has a trailing four-quarter earnings surprise of 1.8%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.

Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.

The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.3% and 4.6%, respectively, from the corresponding year-ago reported figures.

McCormick, a manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. MKC delivered an earnings surprise of 6.2% in the last reported quarter.

The Zacks Consensus Estimate for McCormick’s current financial-year sales suggests growth of 1.8% from the year-ago reported figure.

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