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Mondelez (MDLZ) Up 4.6% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Mondelez (MDLZ - Free Report) . Shares have added about 4.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mondelez due for a pullback? 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 catalysts.
Mondelez Ups View on Q3 Earnings Beat: Organic Sales Aid
Mondelez International delivered robust third-quarter 2023 results. Adjusted earnings were 82 cents per share, increasing 16.7% on a constant-currency (cc) basis. The metric surpassed the Zacks Consensus Estimate of 78 cents per share. The year-over-year upside was mainly backed by solid operating gains, reduced shares outstanding and lower interest expenses. These were somewhat offset by increased taxes, decreased benefit plan non-service income and reduced equity method investment net earnings.
Net revenues advanced 16.3% year over year to $9,029 million. The metric beat the Zacks Consensus Estimate of $8,678 million. The uptick was driven by strong organic net revenue growth of 15.7% and increased sales from Clif Bar and Ricolino buyouts, somewhat negated by currency headwinds. Favorable pricing (up 11.9 percentage points or pp) and volumes (up 3.8 pp) contributed to organic net revenues. Our model suggested pricing and volume increases of 8.9% and 6.6% for the third quarter.
Revenues from emerging markets increased 14% to $3,527 million while rising 19% on an organic basis. Revenues from developed markets moved up 17.8% to $5,502 million while increasing 13.4% on an organic basis. We had expected a year-over-year net revenue increase from emerging markets and developed markets of 9.7% and 13.5%, respectively.
Region-wise, revenues in Latin America, Asia, the Middle East & Africa, Europe and North America increased 42.9%, 5.1%, 16.5% and 14% year over year, respectively. On an organic basis, revenues increased 35.1%, 11.9%, 15.4% and 11.4% in the abovementioned regions, respectively.
The adjusted gross profit increased by $648 million at cc. The adjusted gross profit margin expanded 120 (basis points) bps to 38.6% due to pricing, an improved product mix and reduced manufacturing expenses, partly negated by escalated raw material and transportation costs.
Mondelez’s adjusted operating income rose by $307 million at cc. The adjusted operating income margin expanded 60 bps to 16.7% on increased net pricing, SG&A leverage, a favorable product mix and reduced manufacturing costs stemming from productivity. These were somewhat offset by input cost inflation. Our model suggested the adjusted operating income margin to remain in line with the year-ago period at 16.1%.
Other Financials & Guidance
The company ended the quarter with cash and cash equivalents of $1,610 million, long-term debt of $16,411 million and total equity of $28,560 million. MDLZ provided $3,150 million of net cash from operating activities for the nine months ended Sep 30, 2023. Adjusted free cash flow was $2,370 million for the same period. Management expects a free cash flow of more than $3.3 billion for 2023. The company returned $0.6 billion to shareholders in cash dividends and share repurchases during the reported quarter.
Mondelez now expects 2023 organic net revenue growth of 14-15% compared with the growth of more than 12% projected earlier. The raised outlook takes into account the impressive year-to-date performance.
Management anticipates adjusted earnings per share (EPS) growth on a cc basis of more than 16%, up from more than 12% growth forecast before. Currency movements are likely to affect net revenues by nearly 4% and adjusted EPS by 15 cents in 2023.
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 a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 D. 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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Mondelez (MDLZ) Up 4.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Mondelez (MDLZ - Free Report) . Shares have added about 4.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mondelez due for a pullback? 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 catalysts.
Mondelez Ups View on Q3 Earnings Beat: Organic Sales Aid
Mondelez International delivered robust third-quarter 2023 results. Adjusted earnings were 82 cents per share, increasing 16.7% on a constant-currency (cc) basis. The metric surpassed the Zacks Consensus Estimate of 78 cents per share. The year-over-year upside was mainly backed by solid operating gains, reduced shares outstanding and lower interest expenses. These were somewhat offset by increased taxes, decreased benefit plan non-service income and reduced equity method investment net earnings.
Net revenues advanced 16.3% year over year to $9,029 million. The metric beat the Zacks Consensus Estimate of $8,678 million. The uptick was driven by strong organic net revenue growth of 15.7% and increased sales from Clif Bar and Ricolino buyouts, somewhat negated by currency headwinds.
Favorable pricing (up 11.9 percentage points or pp) and volumes (up 3.8 pp) contributed to organic net revenues. Our model suggested pricing and volume increases of 8.9% and 6.6% for the third quarter.
Revenues from emerging markets increased 14% to $3,527 million while rising 19% on an organic basis. Revenues from developed markets moved up 17.8% to $5,502 million while increasing 13.4% on an organic basis. We had expected a year-over-year net revenue increase from emerging markets and developed markets of 9.7% and 13.5%, respectively.
Region-wise, revenues in Latin America, Asia, the Middle East & Africa, Europe and North America increased 42.9%, 5.1%, 16.5% and 14% year over year, respectively. On an organic basis, revenues increased 35.1%, 11.9%, 15.4% and 11.4% in the abovementioned regions, respectively.
The adjusted gross profit increased by $648 million at cc. The adjusted gross profit margin expanded 120 (basis points) bps to 38.6% due to pricing, an improved product mix and reduced manufacturing expenses, partly negated by escalated raw material and transportation costs.
Mondelez’s adjusted operating income rose by $307 million at cc. The adjusted operating income margin expanded 60 bps to 16.7% on increased net pricing, SG&A leverage, a favorable product mix and reduced manufacturing costs stemming from productivity. These were somewhat offset by input cost inflation. Our model suggested the adjusted operating income margin to remain in line with the year-ago period at 16.1%.
Other Financials & Guidance
The company ended the quarter with cash and cash equivalents of $1,610 million, long-term debt of $16,411 million and total equity of $28,560 million. MDLZ provided $3,150 million of net cash from operating activities for the nine months ended Sep 30, 2023. Adjusted free cash flow was $2,370 million for the same period. Management expects a free cash flow of more than $3.3 billion for 2023. The company returned $0.6 billion to shareholders in cash dividends and share repurchases during the reported quarter.
Mondelez now expects 2023 organic net revenue growth of 14-15% compared with the growth of more than 12% projected earlier. The raised outlook takes into account the impressive year-to-date performance.
Management anticipates adjusted earnings per share (EPS) growth on a cc basis of more than 16%, up from more than 12% growth forecast before. Currency movements are likely to affect net revenues by nearly 4% and adjusted EPS by 15 cents in 2023.
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 a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 D. 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.