Mondelez (MDLZ) Down 3.8% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Mondelez (MDLZ). Shares have lost about 3.8% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mondelez due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Mondelez Q4 Earnings & Sales Beat on Brand Strength
Mondelez International posted impressive fourth-quarter 2022 numbers. The top and bottom lines increased year over year and beat the Zacks Consensus Estimate. Results gained from the resilience of its snacking products, brand strength, broad-based growth across regions, categories and brands, continued strength in emerging and developed markets, and gains from its recent acquisitions.
During the quarter, the company announced the sale of its developed market gum business to Perfetti Van Melle. This move will help fund its recent buyouts and streamline its portfolio. Also, it intends to sell the Halls business in the near future.
Adjusted earnings were 73 cents per share, which increased 2.8% year over year and 9.9% on a constant-currency (cc) basis. The metric surpassed the Zacks Consensus Estimate of 71 cents per share. The year-over-year upside was backed by reduced outstanding shares, and solid operating gains. This was partly countered by the increased taxes, elevated interest expenses and lower income from equity method investments.
Net revenues advanced 13.5% to $8,695 million, which beat the Zacks Consensus Estimate of $8,373 million. The uptick was driven by strong organic net revenue growth of 15.4%, and increased sales from the Chipita, Clif Bar and Ricolino buyout, somewhat negated by currency headwinds. Favorable volumes and pricing contributed to organic net revenues.
Revenues from emerging markets increased 23.3% to $3,320 million, while rising 24.7% on an organic basis. Revenues from developed markets moved up 8.2% to $5,375 million, while increasing 10.5% on an organic basis.
Region-wise, revenues in Latin America; Asia, the Middle East & Africa; Europe; and North America increased 43.2%, 1.3%, 2.9% and 28.3% year over year, respectively. On an organic basis, revenues increased 37.1%, 13.6%, 8.7% and 19.5% in the above-mentioned regions, respectively.
The adjusted gross profit ascended to $473 million at cc. The adjusted gross profit margin contracted by 120 basis points (bps) to 36% due to increased raw material and transportation costs, and an adverse mix. These were somewhat negated by favorable pricing. Mondelez’s adjusted operating income rose $201 million at cc. The adjusted operating income margin contracted by 30 bps to 15% due to inflated input costs and an adverse mix, largely countered by SG&A leverage and favorable pricing.
Other Financials & Guidance
The company ended the quarter with cash and cash equivalents of $1,923 million, long-term debt of $20,251 million, and total equity of $26,920 million. MDLZ provided $3,908 million of net cash from operating activities as of Dec 31, 2022. Free cash flow was $3 billion for the same period. Management expects a free cash flow of more than $3.3 billion for 2023.
The company returned $700 million to shareholders in the forms of cash dividends and share repurchases. MDLZ’s board approved a share authorization program worth up to $6 billion of Class A common stock valid till Dec 31, 2025.
For 2023, Mondelez expects organic net revenues of 5-7%. The company envisions a high single-digit increase in adjusted earnings per share or EPS at cc. Currency movements are likely to negatively impact net revenues by 1% and adjusted EPS by 4 cents in 2023. Adjusted effective tax rate is predicted to be in the low to mid-20.
However, the company expects another year of double-digit inflation stemming from continued elevated cost in packaging, energy, ingredients and labor. The company is also likely to benefit from higher operating income and gains from the acquisitions of Clif and Ricolino. For first-quarter 2023, it anticipates lower margins due to lower volumes in Europe. Europe region is expected to remain drab in the second quarter as well.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, Mondelez has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Mondelez has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Mondelez International, Inc. (MDLZ) : Free Stock Analysis Report
