Back to top

Image: Bigstock

Mondelez (MDLZ) Growth Strategy Includes Portfolio Focus & More

Read MoreHide Full Article

On its Investor Day, Mondelez International, Inc. (MDLZ - Free Report) spoke about the progress of its strategy, which is focused on accelerating growth and concentrating the company’s portfolio toward delivering solid and sustainable shareholder value. Management stated that it will continue to prioritize Growth, Execution and Culture as the three pillars of its strategy.

Mondelez revised its long-term algorithm to the organic net revenue growth of 3% to 5% compared with the previous view of more than 3% growth. Let’s take a closer look at the company’s portfolio focus, investments in capabilities and long-term algorithms.

Zacks Investment Research
Image Source: Zacks Investment Research

Portfolio Focus & Investment in Capabilities

Mondelez is on track to reshape its portfolio to generate 90% of its revenues from the chocolates and biscuits categories, including baked snacks. These categories have been historically durable in the developed and emerging markets, with significant scope for growth. To this end, Mondelez intends to augment value organically as well as through meaningful buyouts, which strengthen its presence and help it tap under-represented segments and price tiers. Mondelez has made eight acquisitions since 2018, which contribute $2 billion to the company’s annual revenues.

Simultaneously, management intends to offload its gum business in developed markets following the last year’s strategic review. Mondelez also unveiled plans to sell its global Halls business while continuing to operate other candy brands and products along with its emerging markets gum business.

Speaking of investments in capabilities and culture, MDLZ is investing more than a billion to emerge as a digital snacks leader. Mondelez aims at generating 20% of revenues from digital networks by 2030 compared with 6% in 2021. The company is making several moves in this direction through technological investments along with investments in future-forward commercial growth capacities.

All said, management updated its long-term organic net revenue growth algorithm (as mentioned above), which reflects the progress of its growth strategy. Management continues to anticipate adjusted earnings per share (EPS) growth in the high single digits (at constant currency). It also expects to boost free cash flow gradually to more than $3 billion in the long term.

Wrapping Up

This Zacks Rank #4 (Sell) company is currently battling the rising input cost inflation and supply-chain headwinds. Management expects these bottlenecks to persist in 2022, all the more due to the Ukraine war. However, the abovementioned growth endeavors, together with the company’s core competitive advantages, place it well to generate considerable value for shareholders.

Shares of the company have dipped 0.7% in the past three months against the industry’s growth of 2.7%.

Looking for Consumer Staple Stocks? Check These

Some better-ranked stocks are Sysco Corporation (SYY - Free Report) , McCormick & Company (MKC - Free Report) and Medifast (MED - Free Report) .

Sysco, which engages in the marketing and distribution of various food and related products, carries a Zacks Rank #2 (Buy) at present. Shares of Sysco have rallied 4.8% in the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Sysco’s current financial-year sales and EPS suggests growth of 28.9% and 111.1%, respectively, from the year-ago reported number. SYY has a trailing four-quarter earnings surprise of 3.7%, on average.

McCormick, the manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. Shares of McCormick have dipped 2.4% in the past three months.

The Zacks Consensus Estimate for McCormick’s current financial-year sales and EPS suggests growth of nearly 5% and 3.9%, respectively, from the year-ago reported figure. MKC has a trailing four-quarter earnings surprise of around 1.3%, on average.

Medifast, which manufactures and distributes weight loss, weight management, healthy living products, and other consumable health and nutritional products, currently carries a Zacks Rank #2. Shares of Medifast have dropped 6.9% in the past three months.

The Zacks Consensus Estimate for Medifast’ current financial-year sales and EPS suggests growth of 18.9% and 11.5%, respectively, from the year-ago reported figure. MED has a trailing four-quarter earnings surprise of 12.9%, on average.