Mondelez International, Inc. (MDLZ Quick QuoteMDLZ - Free Report) delivered robust fourth-quarter 2023 results, with the top and the bottom line increased year over year and came ahead of the respective Zacks Consensus Estimate.

Robust results reflect the strength of the company’s categories, brands and geographies. MDLZ witnessed solid revenue and profit growth across all regions. Continuous reinvestments in its brands and capabilities — along with impressive portfolio reshaping efforts — place Mondelez well for future growth. In this regard, the company recently concluded the sales of the developed market gum business for $1.4 billion.

Quarter in Detail

Adjusted earnings were 84 cents per share, increasing 23.5% on a constant-currency (cc) basis. The metric surpassed the Zacks Consensus Estimate of 78 cents per share. The upside was mainly backed by solid operating gains and reduced taxes and interest expenses. Also, the reduced number of shares outstanding was an upside. However, decreased benefit plan non-service income was a headwind.

Net revenues advanced 7.1% year over year to $9,314 million. The metric beat the Zacks Consensus Estimate of $9,300.3 million. The uptick was driven by strong organic net revenue growth of 9.8% and increased sales from Ricolino and a short-term distributor agreement. These were somewhat offset by adverse currency rates and the impact of a divestiture. Our model suggested organic net revenue growth of 7.8% in the fourth quarter.

Favorable pricing actions (up 10.2 percentage points or pp) aided organic net revenue growth, somewhat offset by unfavorable volume/mix (down 0.4 pp). Our model suggested a pricing increase of 7.9% and a volume decrease of 0.1% for the fourth quarter.

Revenues from emerging markets increased 7.8% to $3,580 million while rising 14.9% on an organic basis. The upside can be attributed to gains from countries like Brazil, China, India, Mexico and the Western Andean. Revenues from developed markets moved up 6.7% to $5,734 million while increasing 6.6% on an organic basis, reflecting robust growth from the United States and Europe. We had expected a year-over-year net revenue increase from emerging markets and developed markets of 6.8% and 3.9%, respectively.

Region-wise, revenues in Latin America, Asia, the Middle East & Africa and Europe increased 24.5%, 4.5% and 10.2%, respectively. In the North America regions, revenues dropped 1.1%.  On an organic basis, revenues increased 28.6%, 7.9%, 11.6% and 1.9% in Latin America, Asia, the Middle East & Africa, Europe and North America, respectively.

The adjusted gross profit increased by $531 million at cc. The adjusted gross profit margin expanded 230 bps to 38% on the back of pricing and reduced manufacturing expenses. These were somewhat offset by increased raw material and transportation costs.

Mondelez’s adjusted operating income increased $153 million at cc while the adjusted operating income margin expanded 40 bps to 15.1%. The upside can mainly be attributed to increased net pricing and reduced manufacturing costs. These were somewhat offset by input cost inflation, increased SG&A and advertising as well as consumer promotion costs.

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Other Financials

The company ended the quarter with cash and cash equivalents of $1,810 million, long-term debt of $16,887 million and total equity of $28,366 million. MDLZ provided $4,714 million of net cash from operating activities for 12-months ended Dec 31, 2023. Adjusted free cash flow was $3,602 million for the same period. Management expects a free cash flow of more than $3.5 billion for 2024.

The company returned $1.5 billion to shareholders in cash dividends and share repurchases during the reported quarter.

Guidance

Mondelez expects 2024 organic net revenue growth in the upper range of 3-5%. Management anticipates seeing higher pricing in various markets with notable chocolate portfolios like Europe.

The company envisions high single-digit adjusted earnings per share (EPS) growth on a cc basis. Currency movements are likely to affect net revenues by nearly 0.5% and adjusted EPS by 3 cents in 2024.

For 2024, it expects inflation to increase by a high single digit, thanks to escalated cocoa and sugar prices as well as higher labor costs. Interest expenses are expected to be around $325 million in 2024.

Shares of this Zacks Rank #3 (Hold) company have increased 10.3% in the past three months compared with the industry’s growth of 11.1%.

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