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Mondelez (MDLZ) Well-Poised on Pricing Actions Amid High Costs
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Mondelez International, Inc. (MDLZ - Free Report) has been on track with its pricing actions amid the rising inflation pressure. The company is also benefiting from its prudent acquisitions and strength in emerging market operations. For 2022, management expects organic net revenues of more than 4%, partly aided by the pricing to counter elevated input costs.
Let’s delve deeper.
Pricing Efforts, Emerging Market Strength
Mondelez is on track with its Revenue Growth Management activities and more investments in people, markets and capabilities. The company is undertaking pricing actions to counter inflationary pressure. In the first quarter of 2022, pricing actions boosted organic net revenue growth and offered partial respite to the company’s adjusted gross profit margin and adjusted operating margin, which were otherwise hurt by cost inflation and an adverse mix.
Talking of the first quarter, MDLZ witnessed strong demand from the emerging and developed markets, with all regions seeing growth. 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. The company 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.
Mondelez International, Inc. Price, Consensus and EPS Surprise
Mondelez has always been keen on expanding its business through acquisitions and alliances. On Apr 25, the company unveiled 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 as well as other markets.
Further, the company acquired the Australia-based food company — Gourmet Food Holdings — which operates in the premium biscuit and cracker category. MDLZ 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. During the quarter, net revenues advanced 7.3% to $7,764 million, which beat the Zacks Consensus Estimate of $7,482 million.
Image Source: Zacks Investment Research
High Costs a Worry
The company 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. The company is also navigating through supply-chain bottlenecks due to labor shortages at third parties. Management anticipates input cost inflation in the low-double-digit range for 2022. The guidance reflects the expected impacts of the Ukraine war and an associated rise in commodity costs, including energy, wheat, oil and packaging.
That said, the abovementioned revenue drivers and saving efforts should help Mondelez stay firm amid hurdles. Shares of this Zacks Rank #3 (Hold) company have declined 1.4% in the past three months compared with the industry’s decline of 3.2%.
Sysco, which engages in marketing and distributing various food and related products, sports a Zacks Rank #1 (Strong Buy). Sysco has a trailing four-quarter earnings surprise of 9.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SYY’s current financial-year sales and earnings per share (EPS) suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.
The Chef's Warehouse, which engages in the distribution of specialty food products, sports a Zacks Rank #1. The Chef's Warehouse has a trailing four-quarter earnings surprise of 372.3%, on average.
The Zacks Consensus Estimate for CHEF’s current financial-year EPS suggests significant growth from the year-ago reported number.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank #2 (Buy). Campbell Soup has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for CPB’s current financial-year sales suggests growth of 0.5% from the year-ago reported figure.
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Mondelez (MDLZ) Well-Poised on Pricing Actions Amid High Costs
Mondelez International, Inc. (MDLZ - Free Report) has been on track with its pricing actions amid the rising inflation pressure. The company is also benefiting from its prudent acquisitions and strength in emerging market operations. For 2022, management expects organic net revenues of more than 4%, partly aided by the pricing to counter elevated input costs.
Let’s delve deeper.
Pricing Efforts, Emerging Market Strength
Mondelez is on track with its Revenue Growth Management activities and more investments in people, markets and capabilities. The company is undertaking pricing actions to counter inflationary pressure. In the first quarter of 2022, pricing actions boosted organic net revenue growth and offered partial respite to the company’s adjusted gross profit margin and adjusted operating margin, which were otherwise hurt by cost inflation and an adverse mix.
Talking of the first quarter, MDLZ witnessed strong demand from the emerging and developed markets, with all regions seeing growth. 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. The company 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.
Mondelez International, Inc. Price, Consensus and EPS Surprise
Mondelez International, Inc. price-consensus-eps-surprise-chart | Mondelez International, Inc. Quote
Buyouts Boost Top Line
Mondelez has always been keen on expanding its business through acquisitions and alliances. On Apr 25, the company unveiled 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 as well as other markets.
Further, the company acquired the Australia-based food company — Gourmet Food Holdings — which operates in the premium biscuit and cracker category. MDLZ 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. During the quarter, net revenues advanced 7.3% to $7,764 million, which beat the Zacks Consensus Estimate of $7,482 million.
Image Source: Zacks Investment Research
High Costs a Worry
The company 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. The company is also navigating through supply-chain bottlenecks due to labor shortages at third parties. Management anticipates input cost inflation in the low-double-digit range for 2022. The guidance reflects the expected impacts of the Ukraine war and an associated rise in commodity costs, including energy, wheat, oil and packaging.
That said, the abovementioned revenue drivers and saving efforts should help Mondelez stay firm amid hurdles. Shares of this Zacks Rank #3 (Hold) company have declined 1.4% in the past three months compared with the industry’s decline of 3.2%.
3 Solid Staple Stocks
Some better-ranked stocks are Sysco Corporation (SYY - Free Report) , The Chef's Warehouse (CHEF - Free Report) and Campbell Soup (CPB - Free Report) .
Sysco, which engages in marketing and distributing various food and related products, sports a Zacks Rank #1 (Strong Buy). Sysco has a trailing four-quarter earnings surprise of 9.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SYY’s current financial-year sales and earnings per share (EPS) suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.
The Chef's Warehouse, which engages in the distribution of specialty food products, sports a Zacks Rank #1. The Chef's Warehouse has a trailing four-quarter earnings surprise of 372.3%, on average.
The Zacks Consensus Estimate for CHEF’s current financial-year EPS suggests significant growth from the year-ago reported number.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank #2 (Buy). Campbell Soup has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for CPB’s current financial-year sales suggests growth of 0.5% from the year-ago reported figure.