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Mondelez (MDLZ) Looks Poised on Lucrative Buyouts, Saving Efforts

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Mondelez International, Inc. (MDLZ - Free Report) is benefiting from its robust growth endeavors that include lucrative acquisitions and efficient savings efforts. Moreover, the company’s focus on innovation and brand building bodes well.

We believe that such factors are likely to get reflected in the company’s fourth-quarter 2020 results later this month. Markedly, the current Zacks Consensus Estimate for fourth-quarter sales and earnings reflects 3.7% and 9.8% increase, respectively, from the figure reported in the prior-year quarter.

Let’s take a closer look.

Factors Working in Favor of Mondelez

Mondelez is always keen on expanding its business through acquisitions. To this end, the company completed the acquisition of Hu Master Holdings, the parent company of Hu Products on Jan 4, 2021. Notably, the acquisition of Hu will provide further growth opportunities in chocolate and cross-category potential in crackers for Mondelez. Moreover, the deal will provide the company important opportunities to expand distribution network that includes e-commerce as well as premium conventional retail channels. Also, Mondelez acquired majority interest in Give & Go (in April 2020), which is a pioneer in fully-finished sweet baked goods. In July 2019, it acquired minority stakes in Perfect Snacks. These investments indicate management’s efforts to boost offerings.


 

Mondelez is refreshing its brand portfolio through product innovation and extending its brands to newer geographies and platforms. In 2018, the company introduced an innovation platform — Joy Fills. This platform 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 is on track to enhance the snacking portfolio, an area which is growing rapidly across the globe.

Speaking of brand-building efforts, Mondelez is 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 earlier stated that it expects to invest significantly in working media and commercial capabilities during the second half of 2020 to enhance its brands. Also, the company is focused on augmenting its e-commerce and grocery channels.

Will Hurdles be Countered?

Mondelez is prone to currency fluctuations owing to its exposure in international markets. Adverse currency movements are hurting the company’s performance. In 2020, management expected unfavorable currency rates to have lowered net revenue growth by nearly 3%. Adjusted earnings per share are likely to have had a negative impact of 4 cents by the same. Apart from this, Mondelez’s revenues from emerging markets declined 3.1% during the third quarter of 2020. In fact, management expects various coronavirus-related restrictions and challenging economic circumstances to continue in parts of Latin America and Middle East Africa.

That said, Mondelez’s cost-saving endeavors together with the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay in investors’ good books. Notably, the company is on track with saving initiatives like zero-based budgeting. It is also on track with eliminating other unnecessary costs from supply chain. During its second-quarter 2020 earnings call, management stated that it expects to remove 25% of SKUs to simplify supply chain as well as lower costs and inventory. Also, the company expects to improve its revenues and enhance customer service by this move. Shares of Mondelez have gained 2.9% in a year compared with the industry’s growth of 0.8%.

Better-Ranked Food Stocks

B&G Foods, Inc. (BGS - Free Report) — sporting a Zacks Rank #1 (Strong Buy) at present — has a trailing four-quarter earnings surprise of 9.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darling Ingredients (DAR - Free Report) , a Zacks Rank #2 (Buy) stock, has a trailing four-quarter earnings surprise of 26.3%, on average.

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