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Mondelez (MDLZ) Benefits From Buyouts, Hurt by Cost Woes
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Mondelez International, Inc. (MDLZ - Free Report) has been benefiting from its efforts to strengthen brands through prudent acquisitions and alliances. The company is also gaining from the strong emerging markets performance. Additionally, favorable demand and revenue growth management efforts are working well for the company.
However, Mondelez has been grappling with cost inflation and supply-chain headwinds for a while now. Though MDLZ is undertaking pricing actions to counter inflationary pressure, it is yet to be seen how effective these initiatives turn out.
Image Source: Zacks Investment Research
Factors Working Well
Mondelez has always been keen on expanding its business through acquisitions and alliances. On Apr 25, the company announced that it inked a deal to buy Ricolino, which is likely to strengthen the company’s Mexican footprint. In January 2022, the company acquired Chipita S.A., which is a major producer of sweet and salty snacks in Central and Eastern Europe. Before this, in 2021, Mondelez took over a renowned sports performance and active nutrition brand – Grenade. Grenade’s on-trend and tasty products position Mondelez to grow in the United Kingdom and other markets.
Further, MDLZ acquired the Australia-based food company — Gourmet Food Holdings — which operates in the premium biscuit and cracker category. Mondelez completed the acquisition of Hu Master Holdings, the parent company of Hu Products on Jan 4, 2021. The acquisition of Hu provides further growth opportunities in chocolate and cross-category potential in crackers for Mondelez. We note that the Chipita, Grenade and Gourmet Food buyouts contributed to the company’s top line in the first quarter of 2022.
Mondelez remains encouraged by the underlying emerging market strength. In the first quarter of 2022, revenues from emerging markets increased by 15.6% to $2,964 million while rising 16.5% on an organic basis. The company saw strength in Brazil, Mexico, India and Southeast Asia (all up in double digits) and China saw high-single-digit growth. MDLZ is boosting its presence in emerging markets as evident from the addition of its distribution in 300,000 and 200,000 more respective stores in China and India in 2021.
A Glimpse of Q1
Mondelez reported robust first-quarter 2022 numbers, wherein the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. The solid top line was backed by pricing and volume gains. The company’s chocolate and biscuit businesses largely drove revenues, profitability and free cash flows. The company witnessed strong demand from the emerging and developed markets, with all regions seeing growth. Management is undertaking necessary pricing, revenue growth management, cost containment and business simplification actions to counter the prevalent cost inflation.
Cost Headwinds
Mondelez has been battling cost inflation and supply-chain headwinds for a while now. These hurdles got exacerbated due to the Ukraine war. In the first quarter of 2022, the adjusted gross profit margin contracted 80 basis points (bps) to 38.8% due to increased raw material and transportation costs and an unfavorable mix. Also, the operating income margin contracted 20 bps to 17.7% due to the same factors.
The company is seeing input cost inflation, especially for energy, transportation, packaging, wheat, dairy and edible oils. MDLZ is also navigating through supply-chain bottlenecks due to labor shortages at third parties. Management now anticipates input cost inflation in the low-double-digit range for 2022 compared with the nearly 8% expected earlier. The updated guidance reflects the expected impacts of the Ukraine war and an associated rise in commodity costs, including energy, wheat, oil and packaging.
Management now envisions mid-to-high single-digit growth in adjusted earnings per share or EPS at constant currency, down from a high-single-digit increase forecast before. Apart from input cost inflation, the guidance also includes investments to support brands and other growth-oriented investments.
Shares of this Zacks Rank #3 (Hold) company have declined 4.7% in the past three months compared with the industry’s drop of 4.1%.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). Pilgrim’s Pride has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for PPC’s current financial-year EPS suggests growth of almost 43% from the year-ago reported number.
Sysco, which engages in marketing and distributing various food and related products, sports a Zacks Rank #1. Sysco has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for SYY’s current financial-year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). Medifast has a trailing four-quarter earnings surprise of 12.9%, on average.
The Zacks Consensus Estimate for MED’s current financial-year sales and EPS suggests growth of almost 19% and 13.4%, respectively, from the year-ago reported figure.
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Mondelez (MDLZ) Benefits From Buyouts, Hurt by Cost Woes
Mondelez International, Inc. (MDLZ - Free Report) has been benefiting from its efforts to strengthen brands through prudent acquisitions and alliances. The company is also gaining from the strong emerging markets performance. Additionally, favorable demand and revenue growth management efforts are working well for the company.
However, Mondelez has been grappling with cost inflation and supply-chain headwinds for a while now. Though MDLZ is undertaking pricing actions to counter inflationary pressure, it is yet to be seen how effective these initiatives turn out.
Image Source: Zacks Investment Research
Factors Working Well
Mondelez has always been keen on expanding its business through acquisitions and alliances. On Apr 25, the company announced that it inked a deal to buy Ricolino, which is likely to strengthen the company’s Mexican footprint. In January 2022, the company acquired Chipita S.A., which is a major producer of sweet and salty snacks in Central and Eastern Europe. Before this, in 2021, Mondelez took over a renowned sports performance and active nutrition brand – Grenade. Grenade’s on-trend and tasty products position Mondelez to grow in the United Kingdom and other markets.
Further, MDLZ acquired the Australia-based food company — Gourmet Food Holdings — which operates in the premium biscuit and cracker category. Mondelez completed the acquisition of Hu Master Holdings, the parent company of Hu Products on Jan 4, 2021. The acquisition of Hu provides further growth opportunities in chocolate and cross-category potential in crackers for Mondelez. We note that the Chipita, Grenade and Gourmet Food buyouts contributed to the company’s top line in the first quarter of 2022.
Mondelez remains encouraged by the underlying emerging market strength. In the first quarter of 2022, revenues from emerging markets increased by 15.6% to $2,964 million while rising 16.5% on an organic basis. The company saw strength in Brazil, Mexico, India and Southeast Asia (all up in double digits) and China saw high-single-digit growth. MDLZ is boosting its presence in emerging markets as evident from the addition of its distribution in 300,000 and 200,000 more respective stores in China and India in 2021.
A Glimpse of Q1
Mondelez reported robust first-quarter 2022 numbers, wherein the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. The solid top line was backed by pricing and volume gains. The company’s chocolate and biscuit businesses largely drove revenues, profitability and free cash flows. The company witnessed strong demand from the emerging and developed markets, with all regions seeing growth. Management is undertaking necessary pricing, revenue growth management, cost containment and business simplification actions to counter the prevalent cost inflation.
Cost Headwinds
Mondelez has been battling cost inflation and supply-chain headwinds for a while now. These hurdles got exacerbated due to the Ukraine war. In the first quarter of 2022, the adjusted gross profit margin contracted 80 basis points (bps) to 38.8% due to increased raw material and transportation costs and an unfavorable mix. Also, the operating income margin contracted 20 bps to 17.7% due to the same factors.
The company is seeing input cost inflation, especially for energy, transportation, packaging, wheat, dairy and edible oils. MDLZ is also navigating through supply-chain bottlenecks due to labor shortages at third parties. Management now anticipates input cost inflation in the low-double-digit range for 2022 compared with the nearly 8% expected earlier. The updated guidance reflects the expected impacts of the Ukraine war and an associated rise in commodity costs, including energy, wheat, oil and packaging.
Management now envisions mid-to-high single-digit growth in adjusted earnings per share or EPS at constant currency, down from a high-single-digit increase forecast before. Apart from input cost inflation, the guidance also includes investments to support brands and other growth-oriented investments.
Shares of this Zacks Rank #3 (Hold) company have declined 4.7% in the past three months compared with the industry’s drop of 4.1%.
3 Solid Staple Stocks
Some better-ranked stocks are Pilgrim’s Pride (PPC - Free Report) , Sysco Corporation (SYY - Free Report) and Medifast (MED - Free Report) .
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). Pilgrim’s Pride has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for PPC’s current financial-year EPS suggests growth of almost 43% from the year-ago reported number.
Sysco, which engages in marketing and distributing various food and related products, sports a Zacks Rank #1. Sysco has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for SYY’s current financial-year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.
Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). Medifast has a trailing four-quarter earnings surprise of 12.9%, on average.
The Zacks Consensus Estimate for MED’s current financial-year sales and EPS suggests growth of almost 19% and 13.4%, respectively, from the year-ago reported figure.