Mondelez International, Inc. (MDLZ - Free Report) is set to strengthen its position in the snacking space, evident from management’s recently unveiled new long-term strategy. Incidentally, the company established a new long-term plan to speed up growth and boost shareholders’ returns. To achieve this, Mondelez aims to concentrate on driving consumer-centric growth and operational excellence, alongside establishing a winning growth culture.
Moreover, management provided fresh long-term goals and a guidance for 2019, while it reiterated its projections for 2018 considering the long-term strategy. We note that Mondelez’s strategic plan is strongly focused on augmenting the top line, which entails solid investments. Per sources, these are likely to impact earnings to an extent, which seems to be the reason behind a 2.2% drop in Mondelez’s shares on Sep 7. Nonetheless, sales are poised to benefit from these plans, which should provide some cover.
Mondelez’s Strategic Plan
In a bid to deliver a sturdy top-line growth, Mondelez remains committed toward various core strategies like transforming its digital and marketing capacities to fuel ROI; increasing e-commerce investments; focusing on innovations; strengthening presence in regions with greater growth potential and making equal heritage brand investments locally and globally. Also, the company intends to thoroughly analyze consumer snacking patterns to improve its brand position. Additionally, Mondelez plans to extend its brands into new markets and snacking adjacencies, for which it also plans to leverage alliances and M&A activities.
Other than boosting its top line, the company also plans to remain focused on driving operational excellence. To this end, the company not only concentrates on cost and productivity enhancements, but also aims to boost day-to-day operations with world-class customer service capacities, and improved marketing and sales. Further, Mondelez is on track to implement its “Snacking Made Right” strategy offering consumers the appropriate snack for the right moment, prepared in the apt way. The company is also focused on the reorientation of the organization to drive growth.
Near-Term & Long-Term Projections
Considering the aforementioned strategies, management projects organic net revenues to increase more than 3% over the long term, while constant currency adjusted earnings per share is anticipated to increase high-single digits. Further, Mondelez expects long-term free cash flow to exceed $3 billion and dividend growth to surpass bottom-line growth.
For 2019, Mondelez expects organic net revenues to increase in a range of 2-3%. Constant currency adjusted earnings per share growth is envisioned in a band of 3-5% and free cash flow is anticipated to be nearly $2.8 billion. As for 2018, management reiterated its outlook and expects organic net revenue growth to be at the higher end of the prior guidance of 1-2%. Markedly, management now anticipates share buybacks of roughly $2 billion in 2018.
We expect these long-term strategies to drive this Zacks Rank #3 (Hold) company that has gained 6.3% in the past three months, outperforming the industry’s growth of close to 5%.
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