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Mondelez (MDLZ) Q3 Earnings Top, Revenues Lag Estimates
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Mondelez International, Inc. (MDLZ - Free Report) reported third-quarter 2016 results wherein earnings beat the Zacks Consensus Estimate while revenues missed the same.
Earnings Details
Third-quarter adjusted earnings of 52 cents per share beat the Zacks Consensus Estimate of 43 cents by 20.9%.
On a constant currency basis, earnings grew 42.1%, primarily driven by operating gains, strong results from coffee equity income investments and lower taxes.
Mondelez is aggressively reducing costs under its $3.5 billion restructuring plan, which was announced in 2014. Per the plan, the company is accelerating supply chain cost savings and reducing overhead costs through layoffs, asset disposals and implementation of a zero-based budgeting system (ZBB). The savings from the program are being used to fund marketing investments and capacity expansion to accelerate top-line growth and boost market share.
Net revenue decreased 6.6% year over year to $6.39 billion due to negative currency impact and deconsolidation of the company's Venezuelan operations.
Revenues missed the Zacks Consensus Estimate of $6.46 billion by 1.08%.
Organic revenues inched up 1.1%, less than 1.5% recorded in the last quarter. The year over year upside was driven by continued improvement in overall volume/mix trends and pricing to recover currency-driven input costs in inflationary markets.
Pricing increased 0.6% to recover commodity and currency-related input cost inflation. However, the pricing gains were less than 1.6% recorded in the previous quarter. Volume mix increased 0.5%.
Margins
Adjusted gross margin increased 30 basis points (bps) year over year to 39.9% as strong net productivity and improved volume/mix was mostly offset by higher trade investments in a few key markets.
Adjusted operating income increased 16.9% year over year on a constant currency basis to $1.01 billion. Adjusted operating margin increased 220 bps year over year to 15.8% on the back continued reductions in overhead costs, driven by the ongoing benefits from zero-based budgeting and increased shared service activities.
Financials
The company reported cash and cash equivalents of $1.68 billion as on Sep 30, 2016. It repurchased approximately $475 million of its common stock in the quarter and paid around $264 million in cash dividends. The company also returned approximately $2.6 billion to shareholders, year to date.
2016 Guidance
Organic net revenue is expected to increase approximately 1.6% in 2016. Foreign currency is likely to hurt net revenue by roughly 4%.
Adjusted operating margin is still expected in the range of 15%–16% for 2016.
Management expects adjusted earnings to increase at a double-digit rate on a constant-currency basis. The company now expects EPS growth of approximately 25%, driven by the year-to-date performance. Currency headwinds are now expected to hurt adjusted earnings by about 9 cents, more than 8 cents expected previously.
Free cash flow is anticipated to be at least $1.4 billion.
Mondelez currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the industry include ConAgra Foods, Inc. (CAG - Free Report) , The Kraft Heinz Company (KHC - Free Report) and Amplify Snack Brands, Inc. (BETR - Free Report) .
ConAgra Foods – a Zacks Rank #2 (Buy) stock – is expected to witness an 19.16% increase in fiscal 2017 earnings.
Amplify Snack – a Zacks Rank #2 stock – is expected to see an 18.8% increase in 2016 earnings.
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Mondelez (MDLZ) Q3 Earnings Top, Revenues Lag Estimates
Mondelez International, Inc. (MDLZ - Free Report) reported third-quarter 2016 results wherein earnings beat the Zacks Consensus Estimate while revenues missed the same.
Earnings Details
Third-quarter adjusted earnings of 52 cents per share beat the Zacks Consensus Estimate of 43 cents by 20.9%.
On a constant currency basis, earnings grew 42.1%, primarily driven by operating gains, strong results from coffee equity income investments and lower taxes.
Mondelez is aggressively reducing costs under its $3.5 billion restructuring plan, which was announced in 2014. Per the plan, the company is accelerating supply chain cost savings and reducing overhead costs through layoffs, asset disposals and implementation of a zero-based budgeting system (ZBB). The savings from the program are being used to fund marketing investments and capacity expansion to accelerate top-line growth and boost market share.
MONDELEZ INTL Price, Consensus and EPS Surprise
MONDELEZ INTL Price, Consensus and EPS Surprise | MONDELEZ INTL Quote
Sales Details
Net revenue decreased 6.6% year over year to $6.39 billion due to negative currency impact and deconsolidation of the company's Venezuelan operations.
Revenues missed the Zacks Consensus Estimate of $6.46 billion by 1.08%.
Organic revenues inched up 1.1%, less than 1.5% recorded in the last quarter. The year over year upside was driven by continued improvement in overall volume/mix trends and pricing to recover currency-driven input costs in inflationary markets.
Pricing increased 0.6% to recover commodity and currency-related input cost inflation. However, the pricing gains were less than 1.6% recorded in the previous quarter. Volume mix increased 0.5%.
Margins
Adjusted gross margin increased 30 basis points (bps) year over year to 39.9% as strong net productivity and improved volume/mix was mostly offset by higher trade investments in a few key markets.
Adjusted operating income increased 16.9% year over year on a constant currency basis to $1.01 billion. Adjusted operating margin increased 220 bps year over year to 15.8% on the back continued reductions in overhead costs, driven by the ongoing benefits from zero-based budgeting and increased shared service activities.
Financials
The company reported cash and cash equivalents of $1.68 billion as on Sep 30, 2016. It repurchased approximately $475 million of its common stock in the quarter and paid around $264 million in cash dividends. The company also returned approximately $2.6 billion to shareholders, year to date.
2016 Guidance
Organic net revenue is expected to increase approximately 1.6% in 2016. Foreign currency is likely to hurt net revenue by roughly 4%.
Adjusted operating margin is still expected in the range of 15%–16% for 2016.
Management expects adjusted earnings to increase at a double-digit rate on a constant-currency basis. The company now expects EPS growth of approximately 25%, driven by the year-to-date performance. Currency headwinds are now expected to hurt adjusted earnings by about 9 cents, more than 8 cents expected previously.
Free cash flow is anticipated to be at least $1.4 billion.
Mondelez currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the industry include ConAgra Foods, Inc. (CAG - Free Report) , The Kraft Heinz Company (KHC - Free Report) and Amplify Snack Brands, Inc. (BETR - Free Report) .
ConAgra Foods – a Zacks Rank #2 (Buy) stock – is expected to witness an 19.16% increase in fiscal 2017 earnings.
Kraft Heinz is likely to see a 48.1% rise in fiscal 2016 earnings. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Amplify Snack – a Zacks Rank #2 stock – is expected to see an 18.8% increase in 2016 earnings.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand.Click to see them now>>