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Why Is Mondelez (MDLZ) Down 2.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for Mondelez (MDLZ - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mondelez due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Mondelez Q2 Earnings Beat, Volume Growth Aids Revenues
Mondelez reported second-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate and improving year over year. The company posted impressive results on the back of volume growth as well as strong performance across major market regions and product categories.
Notably, the second quarter marks the company’s sixth straight quarter of positive bottom-line surprise. The top line surpassed estimates for the second time in a row. The company’s year-on-year top- and bottom-line performance has also been quite impressive for almost a year.
Q2 Performance
Adjusted earnings of 56 cents per share beat the Zacks Consensus Estimate of 54 cents. On a constant-currency (cc) basis, adjusted earnings grew almost 15%, primarily driven by revenue surge, improved gross margin and disciplined management of SG&A expenses.
Net revenues increased 2.1% year over year to $6,112 million and surpassed the Zacks Consensus Estimate of $6,077 million. On an organic basis, revenues rose 3.5% buoyed by solid volumes and pricing.
Revenues in the emerging markets inched up 0.2% and developed markets grew 3.3%. Revenues in power brands rose 5.2%.
Regionally, Europe and North America registered an increase of 6.1% and 6.5% in revenues, respectively. However, revenues in Latin America and Asia, Middle East & Africa declined 8.7% and 2.4% respectively.
Also, from a category perspective, the quarter witnessed growth across biscuits, chocolate, gum and candy businesses. Together, these propelled the company’s snacking business as a whole to grow more than 3%.
Gross profit in the quarter under review was $2,540 million, up 9.8% from the year-ago quarter’s tally. Adjusted gross margin was 40.4%, up 60 bps year on year, driven by enhanced volume leverage and productivity savings.
Also, the company’s operating income totaled $481 million, down 24.4% from the prior-year quarter’s figure. Nevertheless, adjusted operating margin expanded 130 bps year over year to 16.7% on the back of lower selling, general & administrative costs and productivity savings.
In order to maintain strong margins, management stated that it will continue to execute zero-based budgeting (ZBB) program and selectively engage in SG&A spending.
Other Financials
Mondelez reported cash and cash equivalents of $1,246 million as of Jun 30, 2018, significantly up from $761 million as of Dec 31, 2017.
Further, the company repurchased common stock worth $650 million and paid cash dividends of almost $300 million during the second quarter.
Additionally, the company hiked quarterly dividend rates by 18%, concurrent to the earnings release. The revised quarterly cash dividend of 26 cents per share is payable on Oct 12, 2018 to shareholders held in record as on Sep 28, 2018.
Guidance
Propelled by robust second-quarter performance, management now expects organic net revenue growth for 2018 at the higher end of the prior guidance of 1-2%. However, management anticipates currency fluctuations to negatively impact net revenue growth in 2018 by almost 1%.
Nevertheless, management continues to anticipate a double-digit growth in currency-neutral adjusted earnings per share. Further, adjusted operating margin is expected to be 17%.
Apart from this, the company continues to expect 2018 free cash flow of approximately $2.8 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Mondelez has an average Growth Score of C, however its Momentum is doing a bit better with a B. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Notably, Mondelez has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Mondelez (MDLZ) Down 2.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Mondelez (MDLZ - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mondelez due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Mondelez Q2 Earnings Beat, Volume Growth Aids Revenues
Mondelez reported second-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate and improving year over year. The company posted impressive results on the back of volume growth as well as strong performance across major market regions and product categories.
Notably, the second quarter marks the company’s sixth straight quarter of positive bottom-line surprise. The top line surpassed estimates for the second time in a row. The company’s year-on-year top- and bottom-line performance has also been quite impressive for almost a year.
Q2 Performance
Adjusted earnings of 56 cents per share beat the Zacks Consensus Estimate of 54 cents. On a constant-currency (cc) basis, adjusted earnings grew almost 15%, primarily driven by revenue surge, improved gross margin and disciplined management of SG&A expenses.
Net revenues increased 2.1% year over year to $6,112 million and surpassed the Zacks Consensus Estimate of $6,077 million. On an organic basis, revenues rose 3.5% buoyed by solid volumes and pricing.
Revenues in the emerging markets inched up 0.2% and developed markets grew 3.3%. Revenues in power brands rose 5.2%.
Regionally, Europe and North America registered an increase of 6.1% and 6.5% in revenues, respectively. However, revenues in Latin America and Asia, Middle East & Africa declined 8.7% and 2.4% respectively.
Also, from a category perspective, the quarter witnessed growth across biscuits, chocolate, gum and candy businesses. Together, these propelled the company’s snacking business as a whole to grow more than 3%.
Gross profit in the quarter under review was $2,540 million, up 9.8% from the year-ago quarter’s tally. Adjusted gross margin was 40.4%, up 60 bps year on year, driven by enhanced volume leverage and productivity savings.
Also, the company’s operating income totaled $481 million, down 24.4% from the prior-year quarter’s figure. Nevertheless, adjusted operating margin expanded 130 bps year over year to 16.7% on the back of lower selling, general & administrative costs and productivity savings.
In order to maintain strong margins, management stated that it will continue to execute zero-based budgeting (ZBB) program and selectively engage in SG&A spending.
Other Financials
Mondelez reported cash and cash equivalents of $1,246 million as of Jun 30, 2018, significantly up from $761 million as of Dec 31, 2017.
Further, the company repurchased common stock worth $650 million and paid cash dividends of almost $300 million during the second quarter.
Additionally, the company hiked quarterly dividend rates by 18%, concurrent to the earnings release. The revised quarterly cash dividend of 26 cents per share is payable on Oct 12, 2018 to shareholders held in record as on Sep 28, 2018.
Guidance
Propelled by robust second-quarter performance, management now expects organic net revenue growth for 2018 at the higher end of the prior guidance of 1-2%. However, management anticipates currency fluctuations to negatively impact net revenue growth in 2018 by almost 1%.
Nevertheless, management continues to anticipate a double-digit growth in currency-neutral adjusted earnings per share. Further, adjusted operating margin is expected to be 17%.
Apart from this, the company continues to expect 2018 free cash flow of approximately $2.8 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Mondelez has an average Growth Score of C, however its Momentum is doing a bit better with a B. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Notably, Mondelez has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.