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Mondelez (MDLZ) Down 6.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Mondelez (MDLZ - Free Report) . Shares have lost about 6.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Mondelez Q4 Earnings Meet Estimates, Sales Up Y/Y

Mondelez reported fourth-quarter 2020 results, with the top and the bottom line increasing year over year. Also, revenues surpassed the Zacks Consensus Estimate for the ninth successive time. Notably, the bottom line was in line with the consensus mark. The company witnessed net sales growth in developed markets, while performance in the emerging markets was soft in the quarter.

Q4 Performance

Adjusted earnings came in at 67 cents per share, up 9.8% year over year. The metric was in line with the Zacks Consensus Estimate. On a cc basis, adjusted earnings increased 8.2% on the back of operating gains, favorable income taxes and increased equity investment net earnings.

Net revenues increased 5.6% year over year to $7,298 million. Sales surpassed the Zacks Consensus Estimate of $7,170.1 million. The upside was driven by strong organic net revenue growth of 3.2% as well as increased sales from the Give & Go buyout. Moreover, favorable volumes and pricing drove organic net revenues, which were somewhat offset by unfavorable mix.

Revenues from emerging markets declined 2.5% to $2,474 million, while the same increased 4.1% on an organic basis. Revenues from developed markets increased 10.3% to $4,824 million, while the same rose 2.8% on an organic basis.

Regional-wise, revenues in Asia, Middle East & Africa, Europe and North America increased 5%, 5.8% and 13.9% year over year, respectively. However, the same declined 15.4% in Latin America. On an organic basis, revenues increased 1.2%, 3%, 3% and 4.5% in Latin America, Asia, Middle East & Africa, Europe and North America, respectively.

Adjusted gross profit increased $73 million at cc. However, adjusted gross profit margin contracted 80 bps to 39.2% due to escalated raw material costs that were somewhat offset by pricing and manufacturing productivity net of additional coronavirus-induced expenses.

The company’s adjusted operating income increased $60 million at cc. Further, adjusted operating income margin expanded 40 bps to 16.3% led by SG&A leverage that were somewhat offset by reduced adjusted gross profit margin.

Other Financials

Mondelez ended the quarter with cash and cash equivalents of $3,619 million, long-term debt of $17,276 million and total equity of $27,654 million.

The company generated cash from operating activities of $3,964 million during 12 months ended Dec 31, 2020. Free cash flow was $3,101 million during the same time period.

During the quarter, the company distributed $1.1 billion to shareholders through dividend payouts and share buybacks. Management reinstated its share buyback program in November, which was suspended in March due to the coronavirus outbreak.

2021 Outlook

For 2021, Mondelez anticipates its performance be in line with its long-term growth algorithm. Incidentally, the company projects organic net revenues to increase more than 3%. Further, management anticipates adjusted EPS to grow high single-digit percent at cc. Favorable currency rates are expected to increase net revenue growth by nearly 3%, while adjusted EPS are likely to have a positive impact of 10 cents by the same. Also, free cash flow in envisioned to be more than $3 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Mondelez has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions 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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