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Mondelez (MDLZ) Q2 Earnings Beat, Organic Revenues Up 2.5%
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Mondelez International, Inc. (MDLZ - Free Report) reported second-quarter 2024 results, wherein the bottom line beat the Zacks Consensus Estimate while the top line missed the same. Also, earnings improved year over year.
Robust bottom-line results and free cash flow generation can be attributed to effective pricing strategies, efficient cost management and impressive momentum in emerging markets. Despite a challenging and dynamic operating environment, management remained focused on executing the long-term growth strategy. The company continues to reinvest in its brands, expand distribution channels and leverage synergies from recent acquisitions to ensure sustainable growth. It has completed its annual pricing in Europe, which has positioned it well in the second half with respect to sales and volume growth. MDLZ’s China business is also performing well both online and across social commerce.
Mondelez’s core categories of chocolate, biscuit and baked snacks continued to show significant resilience. Volume in seasonal chocolate was up 0.6% on a year-to-date basis, backed by the performance of seasonal shapes, novelties and bite-sized products. Meanwhile, snacking category consumers remain extremely loyal to the brands they love.
Quarter in Detail
Adjusted earnings were 86 cents per share, which increased 25% on a constant-currency (cc) basis. The metric also surpassed the Zacks Consensus Estimate of earnings of 78 cents per share. The upside was mainly backed by solid operating gains, reduced interest expenses and a lower number of shares outstanding, partly offset by elevated taxes.
Net revenues dipped 1.9% year over year to $8,343 million, which came below the Zacks Consensus Estimate of $8,392 million. However, organic net revenues grew 2.5%, driven by higher net pricing, somewhat offset by adverse volume/mix. This was more than offset by adverse currency movements and the impact of the developed market gum business divestiture. Our model estimated organic net revenue growth of 3.1%.
Mondelez International, Inc. Price, Consensus and EPS Surprise
Organic revenue growth was backed by favorable pricing actions (up 4.7 percentage points or pp), somewhat offset by the unfavorable volume/mix (down 2.2 pp).
Revenues from emerging markets fell 1.4% to $3,260 million and rose 4.5% on an organic basis due to growth in several key markets. Revenues from developed markets dipped 2.3% to $5,083 million while increasing 1.2% on an organic basis. We had expected emerging market revenues to decline 1% in the quarter under review.
Region-wise, revenues in Latin America rose 0.3%, while the metric in Asia, the Middle East & Africa, Europe and North America fell 1.4%, 1.8% and 3.4%, respectively. In the North America regions, revenues dropped 2.1%. On an organic basis, revenues rose 4.5%, 4.2%, 2.7% and 0.3% in Latin America, Asia, the Middle East & Africa, Europe and North America, respectively.
The adjusted gross profit increased 9.7% to $3.4 billion. The adjusted gross profit margin expanded 330 bps to 40.5% due to pricing and reduced manufacturing expenses. These were somewhat offset by increased raw material and transportation costs.
Mondelez’s adjusted operating income increased 15.4% to $1.5 billion while the adjusted operating income margin expanded 270 bps to 17.9%. The upside can mainly be attributed to increased net pricing, overhead leverage and reduced manufacturing costs. These were somewhat offset by input cost inflation, as well as increased advertising and consumer promotion costs.
Other Financials
The company ended the quarter with cash and cash equivalents of $1.4 billion, long-term debt of $16.1 billion and total equity of $27.7 million. MDLZ provided $2.1 million of net cash from operating activities for the six months ended Jun 30, 2024. Adjusted free cash flow was $1.5 billion for the same period. Management expects an adjusted free cash flow of more than $3.5 billion for 2024.
The company returned $2.2 billion to shareholders in cash dividends and share repurchases during the first half of 2024. Its board has declared a quarterly cash dividend of $0.470 per share, reflecting an 11% hike from the year-ago figure. The dividend is payable on Oct 14, 2024, to shareholders of record as of Sep 30, 2024. Notably, this marks nine straight years of a double-digit dividend increase.
Guidance
Mondelez reaffirmed the outlook for 2024. It continues to expect organic net revenue growth in the upper range of 3-5%. This reflects the impacts of completing price negotiations in Europe and improvement in North America. It remains on track with its pricing strategies and revenue growth management to counter input cost inflation.
The company envisions high-single-digit adjusted earnings per share (EPS) growth on a cc basis. Currency movements are likely to adversely impact net revenues by nearly 1.5% and adjusted EPS by around 9 cents. Interest expenses are expected to be around $275 million.
Shares of this Zacks Rank #4 (Sell) company have lost 4.6% in the past three months compared to the industry’s 3.3% decline.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 24.8% and 177.1%, respectively, from the prior-year reported levels.
Vital Farms (VITL - Free Report) , which provides pasture-raised products, currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 24.9% and 66.1%, respectively, from the prior-year reported levels.
VITL has a trailing four-quarter earnings surprise of 102.1%, on average.
Post Holdings (POST - Free Report) , a consumer-packaged goods company, is involved in the production of refrigerated, foodservice and nutrition product categories. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for POST’s current financial-year sales and EPS indicates growth of 14.2% and 6.9%, respectively, from the year-ago reported figures.
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Mondelez (MDLZ) Q2 Earnings Beat, Organic Revenues Up 2.5%
Mondelez International, Inc. (MDLZ - Free Report) reported second-quarter 2024 results, wherein the bottom line beat the Zacks Consensus Estimate while the top line missed the same. Also, earnings improved year over year.
Robust bottom-line results and free cash flow generation can be attributed to effective pricing strategies, efficient cost management and impressive momentum in emerging markets. Despite a challenging and dynamic operating environment, management remained focused on executing the long-term growth strategy. The company continues to reinvest in its brands, expand distribution channels and leverage synergies from recent acquisitions to ensure sustainable growth. It has completed its annual pricing in Europe, which has positioned it well in the second half with respect to sales and volume growth. MDLZ’s China business is also performing well both online and across social commerce.
Mondelez’s core categories of chocolate, biscuit and baked snacks continued to show significant resilience. Volume in seasonal chocolate was up 0.6% on a year-to-date basis, backed by the performance of seasonal shapes, novelties and bite-sized products. Meanwhile, snacking category consumers remain extremely loyal to the brands they love.
Quarter in Detail
Adjusted earnings were 86 cents per share, which increased 25% on a constant-currency (cc) basis. The metric also surpassed the Zacks Consensus Estimate of earnings of 78 cents per share. The upside was mainly backed by solid operating gains, reduced interest expenses and a lower number of shares outstanding, partly offset by elevated taxes.
Net revenues dipped 1.9% year over year to $8,343 million, which came below the Zacks Consensus Estimate of $8,392 million. However, organic net revenues grew 2.5%, driven by higher net pricing, somewhat offset by adverse volume/mix. This was more than offset by adverse currency movements and the impact of the developed market gum business divestiture. Our model estimated organic net revenue growth of 3.1%.
Mondelez International, Inc. Price, Consensus and EPS Surprise
Mondelez International, Inc. price-consensus-eps-surprise-chart | Mondelez International, Inc. Quote
Organic revenue growth was backed by favorable pricing actions (up 4.7 percentage points or pp), somewhat offset by the unfavorable volume/mix (down 2.2 pp).
Revenues from emerging markets fell 1.4% to $3,260 million and rose 4.5% on an organic basis due to growth in several key markets. Revenues from developed markets dipped 2.3% to $5,083 million while increasing 1.2% on an organic basis. We had expected emerging market revenues to decline 1% in the quarter under review.
Region-wise, revenues in Latin America rose 0.3%, while the metric in Asia, the Middle East & Africa, Europe and North America fell 1.4%, 1.8% and 3.4%, respectively. In the North America regions, revenues dropped 2.1%. On an organic basis, revenues rose 4.5%, 4.2%, 2.7% and 0.3% in Latin America, Asia, the Middle East & Africa, Europe and North America, respectively.
The adjusted gross profit increased 9.7% to $3.4 billion. The adjusted gross profit margin expanded 330 bps to 40.5% due to pricing and reduced manufacturing expenses. These were somewhat offset by increased raw material and transportation costs.
Mondelez’s adjusted operating income increased 15.4% to $1.5 billion while the adjusted operating income margin expanded 270 bps to 17.9%. The upside can mainly be attributed to increased net pricing, overhead leverage and reduced manufacturing costs. These were somewhat offset by input cost inflation, as well as increased advertising and consumer promotion costs.
Other Financials
The company ended the quarter with cash and cash equivalents of $1.4 billion, long-term debt of $16.1 billion and total equity of $27.7 million. MDLZ provided $2.1 million of net cash from operating activities for the six months ended Jun 30, 2024. Adjusted free cash flow was $1.5 billion for the same period. Management expects an adjusted free cash flow of more than $3.5 billion for 2024.
The company returned $2.2 billion to shareholders in cash dividends and share repurchases during the first half of 2024. Its board has declared a quarterly cash dividend of $0.470 per share, reflecting an 11% hike from the year-ago figure. The dividend is payable on Oct 14, 2024, to shareholders of record as of Sep 30, 2024. Notably, this marks nine straight years of a double-digit dividend increase.
Guidance
Mondelez reaffirmed the outlook for 2024. It continues to expect organic net revenue growth in the upper range of 3-5%. This reflects the impacts of completing price negotiations in Europe and improvement in North America. It remains on track with its pricing strategies and revenue growth management to counter input cost inflation.
The company envisions high-single-digit adjusted earnings per share (EPS) growth on a cc basis. Currency movements are likely to adversely impact net revenues by nearly 1.5% and adjusted EPS by around 9 cents. Interest expenses are expected to be around $275 million.
Shares of this Zacks Rank #4 (Sell) company have lost 4.6% in the past three months compared to the industry’s 3.3% decline.
Key Picks
Freshpet, Inc. (FRPT - Free Report) , a pet food company, has a trailing four-quarter average earnings surprise of 118.2%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 24.8% and 177.1%, respectively, from the prior-year reported levels.
Vital Farms (VITL - Free Report) , which provides pasture-raised products, currently sports a Zacks Rank of 1. The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 24.9% and 66.1%, respectively, from the prior-year reported levels.
VITL has a trailing four-quarter earnings surprise of 102.1%, on average.
Post Holdings (POST - Free Report) , a consumer-packaged goods company, is involved in the production of refrigerated, foodservice and nutrition product categories. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for POST’s current financial-year sales and EPS indicates growth of 14.2% and 6.9%, respectively, from the year-ago reported figures.