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Mondelez (MDLZ) Gains From Solid Pricing Strategies & Buyouts

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Mondelez International, Inc. (MDLZ - Free Report) is gaining from its efficient pricing and lucrative acquisitions. Moreover, the company’s focus on brand building through innovation bodes well. Also, its robust cost-saving plans are noteworthy.

Also, analysts look optimistic regarding the stock’s performance. Evidently, the Zacks Consensus Estimate for 2020 earnings has moved up almost 2% to $2.61 per share in the past 30 days. Notably, shares of the company have gained 14% in the past three months compared with the industry’s growth of 12.9%.

What’s Driving Mondelez’s Growth?

Mondelez’s strategic pricing initiatives are yielding results. During the second quarter of 2020, favorable pricing drove the company’s organic revenues that inched up 0.7% year over year. In fact, the company’s organic sales have been rising for a while. Impressively, a strong brand position combined with yielding strategies has been boosting organic sales.

The company is refreshing its brand portfolio through product innovation and extending its brands to newer geographies and platforms. In 2018, Mondelez introduced an innovation platform — Joy Fills. This platform, which was launched in Europe, is designed to meet growth across brands such as Oreo, Cadbury and Milka. Further, the company’s continued product innovation under the SnackFutures platform bodes well. In fact, management plans to focus on enhancing the snacking portfolio, an area which is growing rapidly across the globe.


 

Speaking of brand building efforts, Mondelez has been increasing investments in in-store execution and advertising to support the Power Brands and innovation funded by cost savings. Such investments are helping the company witness growth in key brands. In fact, management expects to invest significantly in working media during the second half of 2020 to enhance its brands.

Apart from these, Mondelez has always been keen on expanding its business through acquisitions. The company acquired majority interest in Give & Go (in April 2020), which is a pioneer in fully-finished sweet baked goods. In previous developments, it made investments in Hu Master Holdings and Uplift Foods (in April 2019) as part of the SnackFutures platform. In July last year, Mondelez acquired minority stakes in Perfect Snacks. These investments indicate management’s efforts to boost healthy offerings.

Wrapping up

Due to international market exposure, Mondelez is prone to currency fluctuations. During the second quarter, adverse impacts from currency rates dented the company’s top line. Volatility in exchange rates is a threat to the company’s performance. Apart from this, the company’s margins were strained in second-quarter 2020, thanks to higher coronavirus-induced expenses and raw material costs.

Nevertheless, Mondelez’s aforementioned upsides along with cost-saving endeavors are likely to help this Zacks Rank #3 (Hold) company remain in investors’ good books.

Incidentally, Mondelez has been undertaking some major steps to enhance savings. Moreover, such savings are being invested in brand-building endeavors. It is also on track with eliminating other unnecessary costs from the supply chain. During its second-quarter earnings call, management stated that it expects to remove 25% of SKUs with an aim to simplify supply chain, lower costs as well as inventory. Also, the company expects to improve its revenues and enhance its customer service by this move.

3 Solid Food Stocks

TreeHouse Foods (THS - Free Report) , with a Zacks Rank #1 ( Strong Buy), has a long-term earnings growth rate of 7.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

B&G Foods (BGS - Free Report) , with a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 6.9%, on average.

Flowers Foods (FLO - Free Report) , with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 8.2%, on average.

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