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Mondelez's (MDLZ) Q1 Earnings Beat Estimates, Sales Decline

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Mondelez International, Inc. (MDLZ - Free Report) reported first-quarter 2019 results, wherein earnings and sales came ahead of the Zacks Consensus Estimate. The bottom line also improved year over year. Improved pricing and productivity aided results, though escalated costs and adverse currency movements were reasons to worry.

Notably, this Zacks Rank #3 (Hold) stock has gained 11.6% in the past three months against the industry’s rise of 3.2%.



Q1 Performance

Adjusted earnings of 65 cents per share surpassed the Zacks Consensus Estimate of 61 cents. On a constant-currency (cc) basis, adjusted earnings improved nearly 13% year over year, courtesy of operating gains, reduced taxes and share repurchases.

Net revenues dropped almost 3.4% year over year to $6,538 million due to currency headwinds. However, revenues surpassed the Zacks Consensus Estimate of $6,426 million. On an organic basis, revenues rose 3.7%, thanks to balanced pricing and volume/mix.

Revenues from emerging markets declined 3.2% to $2,502 million but increased 8.4% on an organic basis. Revenues from developed markets went down 3.5% to $4,036 million, while inched up 0.8% on an organic basis.

Regionally, revenues in Europe, Latin America, and Asia, Middle East & Africa declined 5.7%, 10.2% and 0.1%, respectively. Nonetheless, on an organic basis, revenues across these regions depicted respective improvements of 2.7%, 8.4% and 6.1%. In North America, revenues rose 1.2% and grew 0.5% organically.

Adjusted gross profit at constant currency, grew 4.5% to reach $2,787 million. Adjusted gross margin expanded 30 basis points (bps) to 39.7%, backed by productivity growth, improved pricing, volume improvements and operating leverage, somewhat negated by escalated input costs.  

Also, the company’s adjusted operating income (on a cc basis) increased 4.2% to reach $1,181 million from the prior-year quarter. Further, adjusted operating margin remained flat at 16.7%, owing to increased raw material and SG&A costs.

Other Financials

Mondelez ended the quarter with cash and cash equivalents of $1,542 million, long-term debt of $12,437 million and total equity of $25,828 million.

During the first three months of 2019, Mondelez generated cash from operating activities of $465 million, while free cash flow came in at $200 million.

During the first quarter, the company repurchased shares worth roughly $650 million and paid cash dividends of about $380 million.

Guidance

For 2019, management is on track with investments to fuel growth across brands and sales capabilities, and develop new offerings. The company also plans to expand sales channels, broaden the snacking portfolio and induce greater agility in supply chain operations.

That said, management reiterated the outlook for 2019. It continues to expect organic net revenue growth of 2-3%. Further, management anticipates currency fluctuations to negatively impact net revenue growth by nearly 3%.

Currency-neutral adjusted earnings per share are likely to grow 3-5%, with currency headwinds expected to have a 9-cent impact.

Apart from this, the company continues to expect 2019 free cash flow of approximately $2.8 billion.

Looking For Consumer Staples Stocks? Check These

McCormick & Company (MKC - Free Report) , with long-term earnings growth rate of 9%, carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Mills (GIS - Free Report) , with a Zacks Rank #2, has long-term earnings per share growth rate of 7.5%.

Inter Parfums (IPAR - Free Report) with long-term EPS growth rate of 12.3%, also carries a Zacks Rank #2.

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