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Why Is Mondelez (MDLZ) Up 3.5% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Mondelez International, Inc. (MDLZ - Free Report) . Shares have added about 3.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it 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 reported first-quarter 2017 results, with both earnings and revenues surpassing the Zacks Consensus Estimate. Cost-saving initiatives as well as higher pricing mainly in Latin America helped the company post better-than-expected results.
Earnings Details
First-quarter adjusted earnings of $0.53 per share beat the Zacks Consensus Estimate of $0.50 by 6%.
On a constant currency basis, earnings grew 6%, primarily driven by operating gains.
Sales Details
Net revenue declined 0.6% year over year to $6.41 billion due to negative currency impact. Emerging markets’ net revenue grew 4.2%, while developed markets reported lackluster results as revenues declined 3.3%.
Reported total revenue exceeded the Zacks Consensus Estimate of $6.37 billion by 0.7%.
Organic revenues inched up 0.6% (including Power Brands growth of 2.5%), same as the rate of increase last quarter.
Many key markets, including Russia, Germany, Southeast Asia, and Mexico posted solid results. Again, India recovered faster than expected from the demonetization impact, delivering high single-digit growth. In fact, barring North America, all regions delivered strong results organically.
Pricing increased 1.1%, same as the rate of increase in the previous quarter. Volume mix decreased 0.5%.
Margins
Adjusted gross margin declined 20 basis points (bps) year over year to 40.3% as strong net productivity and pricing gains were primarily offset by an unfavorable mix and higher input costs.
However, adjusted operating margin increased 90 bps year over year to 16.8% on the back of continued reduction in overhead costs and supply chain productivity savings.
Category Performance
Biscuits business declined 0.3%, primarily due to weakness in the U.S.
Chocolate business grew 5.2% buoyed by strong growth in Germany, India and Brazil.
Gum and candy remained soft from an overall category perspective, declining 5.6% as it continues to experience significant weakness, especially in the U.S.
Segment Discussion
Latin America: Revenues increased 11.4% to $910 million due to favorable currency and higher net pricing. Organically, revenues increased 3.7%, led by strength in Mexico and Brazil. Volume/mix declined 2.7%.
Adjusted operating income increased 540 bps to 15.8%, primarily driven by improved overhead costs and lower A&C spending.
Asia, Middle East & Africa: Revenues declined 1.6% to $1.5 billion due to unfavorable currency and volume/mix. Organically, revenues increased 1.3%. Pricing improved 2.6%. However, volume/mix declined 1.3%.
Adjusted operating income decreased 60 bps due to increased A&C support, which offset lower overhead costs and good productivity.
Europe: Revenues declined 3.4% to $2.4 billion due to unfavorable currency and lower net pricing. Organically, revenues increased 1% primarily due to solid vol/mix. Volume/mix rose 1.6%, while Pricing declined 0.6%.
Adjusted operating income was up 60 bps to 19.5%, driven by strong net productivity and lower overheads.
North America: Revenues fell 1.6% to $1.6 billion due to unfavorable volume/mix and lower net pricing. Organically, revenues decreased 1.9%, primarily due to U.S. biscuits and gum category. Volume/mix declined 1.4% and pricing decreased 0.5%.
Adjusted operating income improved 50 bps to 20.8% due to overhead savings.
Financials
The company reported cash and cash equivalents of $1.31 billion as on Mar 31, 2017, down from $1.74 billion at the end of 2016.
The company returned $770 million of capital to shareholders through share repurchases and dividends in the first quarter.
2017 Guidance Reaffirmed
Organic net revenue is expected to increase 1% in 2017.
Adjusted operating margin is still expected in the mid 16% range. Mondelez is on track to reach its 17–18% profit-margin goal by 2018.
Management expects adjusted earnings to increase double digits on a constant-currency basis.
Currency headwinds are now expected to hurt adjusted earnings by about $0.02 and revenues by around 1 %.
Free cash flow is anticipated at around $2 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to five lower.
At this time, Mondelez's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Why Is Mondelez (MDLZ) Up 3.5% Since the Last Earnings Report?
It has been about a month since the last earnings report for Mondelez International, Inc. (MDLZ - Free Report) . Shares have added about 3.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it 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 Tops Q1 Earnings & Revenues, Margins Grow
Mondelez reported first-quarter 2017 results, with both earnings and revenues surpassing the Zacks Consensus Estimate. Cost-saving initiatives as well as higher pricing mainly in Latin America helped the company post better-than-expected results.
Earnings Details
First-quarter adjusted earnings of $0.53 per share beat the Zacks Consensus Estimate of $0.50 by 6%.
On a constant currency basis, earnings grew 6%, primarily driven by operating gains.
Sales Details
Net revenue declined 0.6% year over year to $6.41 billion due to negative currency impact. Emerging markets’ net revenue grew 4.2%, while developed markets reported lackluster results as revenues declined 3.3%.
Reported total revenue exceeded the Zacks Consensus Estimate of $6.37 billion by 0.7%.
Organic revenues inched up 0.6% (including Power Brands growth of 2.5%), same as the rate of increase last quarter.
Many key markets, including Russia, Germany, Southeast Asia, and Mexico posted solid results. Again, India recovered faster than expected from the demonetization impact, delivering high single-digit growth. In fact, barring North America, all regions delivered strong results organically.
Pricing increased 1.1%, same as the rate of increase in the previous quarter. Volume mix decreased 0.5%.
Margins
Adjusted gross margin declined 20 basis points (bps) year over year to 40.3% as strong net productivity and pricing gains were primarily offset by an unfavorable mix and higher input costs.
However, adjusted operating margin increased 90 bps year over year to 16.8% on the back of continued reduction in overhead costs and supply chain productivity savings.
Category Performance
Biscuits business declined 0.3%, primarily due to weakness in the U.S.
Chocolate business grew 5.2% buoyed by strong growth in Germany, India and Brazil.
Gum and candy remained soft from an overall category perspective, declining 5.6% as it continues to experience significant weakness, especially in the U.S.
Segment Discussion
Latin America: Revenues increased 11.4% to $910 million due to favorable currency and higher net pricing. Organically, revenues increased 3.7%, led by strength in Mexico and Brazil. Volume/mix declined 2.7%.
Adjusted operating income increased 540 bps to 15.8%, primarily driven by improved overhead costs and lower A&C spending.
Asia, Middle East & Africa: Revenues declined 1.6% to $1.5 billion due to unfavorable currency and volume/mix. Organically, revenues increased 1.3%. Pricing improved 2.6%. However, volume/mix declined 1.3%.
Adjusted operating income decreased 60 bps due to increased A&C support, which offset lower overhead costs and good productivity.
Europe: Revenues declined 3.4% to $2.4 billion due to unfavorable currency and lower net pricing. Organically, revenues increased 1% primarily due to solid vol/mix. Volume/mix rose 1.6%, while Pricing declined 0.6%.
Adjusted operating income was up 60 bps to 19.5%, driven by strong net productivity and lower overheads.
North America: Revenues fell 1.6% to $1.6 billion due to unfavorable volume/mix and lower net pricing. Organically, revenues decreased 1.9%, primarily due to U.S. biscuits and gum category. Volume/mix declined 1.4% and pricing decreased 0.5%.
Adjusted operating income improved 50 bps to 20.8% due to overhead savings.
Financials
The company reported cash and cash equivalents of $1.31 billion as on Mar 31, 2017, down from $1.74 billion at the end of 2016.
The company returned $770 million of capital to shareholders through share repurchases and dividends in the first quarter.
2017 Guidance Reaffirmed
Organic net revenue is expected to increase 1% in 2017.
Adjusted operating margin is still expected in the mid 16% range. Mondelez is on track to reach its 17–18% profit-margin goal by 2018.
Management expects adjusted earnings to increase double digits on a constant-currency basis.
Currency headwinds are now expected to hurt adjusted earnings by about $0.02 and revenues by around 1 %.
Free cash flow is anticipated at around $2 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to five lower.
Mondelez International, Inc. Price and Consensus
Mondelez International, Inc. Price and Consensus | Mondelez International, Inc. Quote
VGM Scores
At this time, Mondelez's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.