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Mondelez Strong on Portfolio & Innovation: Should You Add?
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On Dec 15, we issued an updated research report on Mondelez International, Inc. (MDLZ - Free Report) – one of the leading global snacks company.
Mondelez’s strong brand portfolio, focus on innovation, strong presence in emerging markets, cost savings and productivity gains are major positives.
However, the company’s shares have lost 4.9% year to date, underperforming 7.1% growth for the Zacks categorized Food-MiscellaeousPreparation/Diversified industry. Estimates for the current year have moved up 5.4% over the last 60 days. Given its progress on strong fundamentals, the stock should perform well in the quarters ahead.
Recently, talks about Kraft Heinz Co. (KHC) acquiring Mondelez have been doing the rounds which sent the latter’s shares rallying on Dec 14. However, Mondelez did not confirm any such news.
What’s Driving Mondelez?
Mondelez is a worldwide leader in biscuits, chocolate and candy and holds a dominant position in gum. Its portfolio includes seven brands which generate revenues in excess of $1 billion and have been named as “Power Brands”. Mondelez has the competitive advantage of selling snack items in complementary food categories. The complimentary portfolio results in cost leverage, capability sharing and other commercial benefits.
The company is refreshing its brand portfolio through product innovation and extending its brands to newer geographies and platforms. Mondelez is also increasing investments in in-store execution and advertising to support the Power Brands .
The company generates around 40% revenues from the emerging markets including India, Mexico, Russia and Southeast Asia. Developing markets boast significant growth potential due to relatively low per-capita consumption.
Though sales have been slowing down, Mondelez has been focusing on expanding margins through cost savings and productivity improvement. The company’s restructuring plan (2014–2018 Restructuring Program) is accelerating supply chain cost savings and reducing overhead costs through layoffs, asset disposals and implementation of a zero-based budgeting system (ZBB) to offset commodity and currency driven inflation.
Concerns
Mondelez’s volumes have been getting affected by multiple factors like the elasticity impact from higher pricing and category weakness because of soft consumer demand since 2014.
Foreign exchange headwind is also a major concern with around 80% of its revenues coming from outside the U.S. Though the dollar has weakened slightly in 2016, the negative currency impact is still considerable. Foreign exchange is expected to be a 4% headwind for revenues in 2016.
Zacks Rank & Other Key Picks
Mondelez carries a Zacks Rank #2 (Buy).
Other favorably ranked stocks in the same industry include Ingredion Incorporated (INGR - Free Report) , Lancaster Colony Corporation (LANC - Free Report) and Tate & Lyle plc (TATYY - Free Report) .
Ingredion’s earnings are expected to increase 20% in 2016.
Lancaster is expected to see a 7.3% increase in fiscal 2017 earnings.
Tate & Lyle is likely to witness a 12% decline in fiscal 2017 earnings.
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Mondelez Strong on Portfolio & Innovation: Should You Add?
On Dec 15, we issued an updated research report on Mondelez International, Inc. (MDLZ - Free Report) – one of the leading global snacks company.
Mondelez’s strong brand portfolio, focus on innovation, strong presence in emerging markets, cost savings and productivity gains are major positives.
However, the company’s shares have lost 4.9% year to date, underperforming 7.1% growth for the Zacks categorized Food-MiscellaeousPreparation/Diversified industry. Estimates for the current year have moved up 5.4% over the last 60 days. Given its progress on strong fundamentals, the stock should perform well in the quarters ahead.
Recently, talks about Kraft Heinz Co. (KHC) acquiring Mondelez have been doing the rounds which sent the latter’s shares rallying on Dec 14. However, Mondelez did not confirm any such news.
What’s Driving Mondelez?
Mondelez is a worldwide leader in biscuits, chocolate and candy and holds a dominant position in gum. Its portfolio includes seven brands which generate revenues in excess of $1 billion and have been named as “Power Brands”. Mondelez has the competitive advantage of selling snack items in complementary food categories. The complimentary portfolio results in cost leverage, capability sharing and other commercial benefits.
The company is refreshing its brand portfolio through product innovation and extending its brands to newer geographies and platforms. Mondelez is also increasing investments in in-store execution and advertising to support the Power Brands .
The company generates around 40% revenues from the emerging markets including India, Mexico, Russia and Southeast Asia. Developing markets boast significant growth potential due to relatively low per-capita consumption.
Though sales have been slowing down, Mondelez has been focusing on expanding margins through cost savings and productivity improvement. The company’s restructuring plan (2014–2018 Restructuring Program) is accelerating supply chain cost savings and reducing overhead costs through layoffs, asset disposals and implementation of a zero-based budgeting system (ZBB) to offset commodity and currency driven inflation.
Concerns
Mondelez’s volumes have been getting affected by multiple factors like the elasticity impact from higher pricing and category weakness because of soft consumer demand since 2014.
Foreign exchange headwind is also a major concern with around 80% of its revenues coming from outside the U.S. Though the dollar has weakened slightly in 2016, the negative currency impact is still considerable. Foreign exchange is expected to be a 4% headwind for revenues in 2016.
Zacks Rank & Other Key Picks
Mondelez carries a Zacks Rank #2 (Buy).
Other favorably ranked stocks in the same industry include Ingredion Incorporated (INGR - Free Report) , Lancaster Colony Corporation (LANC - Free Report) and Tate & Lyle plc (TATYY - Free Report) .
All three companies carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ingredion’s earnings are expected to increase 20% in 2016.
Lancaster is expected to see a 7.3% increase in fiscal 2017 earnings.
Tate & Lyle is likely to witness a 12% decline in fiscal 2017 earnings.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>