Mondelez International, Inc. (MDLZ - Free Report) is an attractive investment pick, courtesy of well-chalked measures to drive growth. The company has been gaining from its efficient pricing strategies, solid innovation and robust emerging market presence. Moreover, it has undertaken prudent acquisitions and partnerships to widen its brand portfolio.
Notably, this trend continued in fourth-quarter 2019, with the top line increasing year over year. Also, management envisions currency-neutral adjusted earnings per share to grow in high-single digits in 2020.
Clearly, encouraging performance and a positive outlook have raised analysts’ optimism regarding the stock’s performance. Evidently, the Zacks Consensus Estimate for 2020 earnings has moved up by a couple of cents to $2.67 in the past 30 days. Moreover, Mondelez’s shares have increased 8.1% since its earnings release. In fact, shares of this Zacks Rank #3 (Buy) company have rallied 26.4% in the past year compared with the industry’s growth of 11.5%.
Factors Boosting Mondelez’s Growth
Mondelez’s strategic pricing initiatives are yielding results. During the fourth quarter of 2019, balanced pricing and volume/mix led the company’s organic revenues to rise 4.1%. We note that the company’s organic sales have been rising for a while. A strong brand position along with yielding strategies has been boosting its organic sales. Encouragingly, management expects organic net revenue growth of more than 3% for 2020.
Moreover, the company is focused on refreshing its brand portfolio through product innovation and extending its brands to newer geographies and platforms. To this end, the company introduced an innovation platform — Joy Fills. Also, the introduction of Lickables in India has been doing well. Further, management plans to continue introducing products under the SnackFutures platform. Additionally, the company focuses on boosting brand popularity through advertising campaigns across different media platforms. In this regard, Mondelez had formed a global strategic partnership with Facebook (FB - Free Report) , Google and Amazon (AMZN - Free Report) in the United States to strengthen its brand presence across digital media.
Further, Mondelez has been expanding its business through acquisitions and partnerships. As part of the SnackFutures platform, the company made investments in Hu Master Holdings and Uplift Foods in April 2019. In July 2019, it acquired minority stakes in Perfect Snacks. These investments are in sync with management’s efforts to boost healthy offerings. In January 2018, the company teamed up with Post Consumer Brands — a business unit of Post Holdings (POST - Free Report) — to create two new cookie-inspired breakfast cereals.
Apart from this, Mondelez generates solid business from emerging markets like Brazil, China, India, Mexico, Russia and Southeast Asia. Management explores brand growth opportunities in these regions based on local consumer preferences. During the fourth quarter, revenues from emerging markets rose 4% to $2,538 million and the same increased 8.2% on an organic basis.
Will Hurdles be Countered?
Due to international-market exposure, Mondelez is prone to currency fluctuations. In fact, adverse currency movements have been hurting the company’s performance for a while. During the fourth quarter, adverse impacts from currency rates dented the company’s top line. Apart from this, Mondelez’s margins were strained in the fourth quarter due to plant transition hurdles in Brazil, increased inflation in Argentina and weakness in powdered beverages. Though the persistence of such headwinds is a threat to profitability, we expect these hurdles to be more than offset by the aforementioned upsides.
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