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Mondelez (MDLZ) Q4 Earnings: Disappointment in the Cards?
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Mondelez International, Inc. (MDLZ - Free Report) is set to report fourth-quarter 2016 results on Feb 7, after the market closes.
Last quarter, the company posted a positive earnings surprise of 20.93%. The company has also clocked positive earnings surprises in three of the past four quarters, at an average of 11.20%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
After solid earnings growth in third-quarter 2016, Mondelez expects its 2016 adjusted EPS to rise 25% on a constant currency basis. That said, currency headwinds are likely to drag down the company’s 2016 adjusted EPS by about 9 cents. Foreign exchange headwind is also a major concern with around 80% of its revenues coming from outside the U.S. This trend is estimated to continue in the soon-to-be reported quarter.
The North American food industry has been witnessing sluggish growth and slowdown in consumption for the last few quarters due to soft consumer spending environment. Given the slower category growth environment and more challenging conditions in emerging markets, the company anticipates full-year organic net revenue to grow about 1.6%. Even during the first nine months of 2016, the company’s net revenues decreased 14% year over year.
In the fourth quarter, Mondelez will likely witness positive vol/mix, while flat to slightly positive vol/mix for the full year.
In order to mitigate the impact of weak sales, Mondelez has been trying to improve its bottom line through cost-control and productivity initiatives. As stated earlier, the company is likely to make more investments in the fourth quarter to stage 2017.
However, some unfavorable factors are impacting the company’s margins. The company’s gross margin narrowed in Q2 and Q3. That said, it remains on track to deliver 15%–16% adjusted operating margin goal.
For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 49 cents, reflecting a 5.9% year-over-year increase. Meanwhile, our estimate for revenues is $6.87 billion, implying a 6.7% decline.
Earnings Whispers
Our proven model does not conclusively show that Mondelez is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Mondelez is -4.08% as the Most Accurate estimate of 47 cents is lower than the Zacks Consensus Estimate of 49 cents.
Zacks Rank: Although Mondelez’s Zacks Rank #3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Mondelez International, Inc. Price and EPS Surprise
Here are some companies in the consumer staples sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:
Coty Inc. (COTY - Free Report) , slated to report its quarterly numbers on Feb 9, has an Earnings ESP of +8.33% and a Zacks Rank #3.
Sanderson Farms, Inc. has an Earnings ESP of +4.48% and a Zacks Rank #3. The company is scheduled to report its quarterly numbers on Feb 23. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Pinnacle Foods, Inc. has an Earnings ESP of +1.27% and a Zacks Rank #2. The company is scheduled to report its quarterly numbers on Feb 23.
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Mondelez (MDLZ) Q4 Earnings: Disappointment in the Cards?
Mondelez International, Inc. (MDLZ - Free Report) is set to report fourth-quarter 2016 results on Feb 7, after the market closes.
Last quarter, the company posted a positive earnings surprise of 20.93%. The company has also clocked positive earnings surprises in three of the past four quarters, at an average of 11.20%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
After solid earnings growth in third-quarter 2016, Mondelez expects its 2016 adjusted EPS to rise 25% on a constant currency basis. That said, currency headwinds are likely to drag down the company’s 2016 adjusted EPS by about 9 cents. Foreign exchange headwind is also a major concern with around 80% of its revenues coming from outside the U.S. This trend is estimated to continue in the soon-to-be reported quarter.
The North American food industry has been witnessing sluggish growth and slowdown in consumption for the last few quarters due to soft consumer spending environment. Given the slower category growth environment and more challenging conditions in emerging markets, the company anticipates full-year organic net revenue to grow about 1.6%. Even during the first nine months of 2016, the company’s net revenues decreased 14% year over year.
In the fourth quarter, Mondelez will likely witness positive vol/mix, while flat to slightly positive vol/mix for the full year.
In order to mitigate the impact of weak sales, Mondelez has been trying to improve its bottom line through cost-control and productivity initiatives. As stated earlier, the company is likely to make more investments in the fourth quarter to stage 2017.
However, some unfavorable factors are impacting the company’s margins. The company’s gross margin narrowed in Q2 and Q3. That said, it remains on track to deliver 15%–16% adjusted operating margin goal.
For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at 49 cents, reflecting a 5.9% year-over-year increase. Meanwhile, our estimate for revenues is $6.87 billion, implying a 6.7% decline.
Earnings Whispers
Our proven model does not conclusively show that Mondelez is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Mondelez is -4.08% as the Most Accurate estimate of 47 cents is lower than the Zacks Consensus Estimate of 49 cents.
Zacks Rank: Although Mondelez’s Zacks Rank #3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Mondelez International, Inc. Price and EPS Surprise
Mondelez International, Inc. Price and EPS Surprise | Mondelez International, Inc. Quote
Stocks to Consider
Here are some companies in the consumer staples sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat in their upcoming releases:
Coty Inc. (COTY - Free Report) , slated to report its quarterly numbers on Feb 9, has an Earnings ESP of +8.33% and a Zacks Rank #3.
Sanderson Farms, Inc. has an Earnings ESP of +4.48% and a Zacks Rank #3. The company is scheduled to report its quarterly numbers on Feb 23. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Pinnacle Foods, Inc. has an Earnings ESP of +1.27% and a Zacks Rank #2. The company is scheduled to report its quarterly numbers on Feb 23.
"The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>