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Assorted Milka chocolates, mondelez

Mondelez International, one of the world’s largest snack companies, forecasts profit to grow over 5% this year and reported its net revenues increased 4.9% in the third quarter as people stuck at home during the coronavirus pandemic stocked cookies and chocolates, sending its shares up over 2% on Monday.

Manufacturer of Oreo cookies and Cadbury chocolates said its diluted EPS in the third quarter was $0.78, down 20.4%, lapping a prior-year benefit from Swiss tax reform; Adjusted EPS in the quarter was $0.63, flat on a constant-currency basis. That was in line with market expectations.

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On the year-to-date basis, diluted EPS was $1.66, down 24.2%, lapping a prior-year benefit from Swiss tax reform and Adjusted EPS was $1.92, up 5.9% on a constant-currency basis.

For 2020, Mondelez forecasts organic net revenue to grow more than 3.5% and expects adjusted EPS growth of over 5% on a constant-currency basis. The company estimates currency translation would decrease 2020 net revenue growth by nearly 3% with a negative $0.04 impact to Adjusted EPS.

“With 2021 suggested to be another on-algo year despite accelerating brand investment, we continue to favour the stock, as Mondelez remains a stable globally diversified compounder trading at a discount to other multinational CPG companies,” said Rob Dickerson, equity analyst at Jefferies.

“Stock still has upside given end-market positioning, efficiency gains, and liquidity vis-a-vis valuation. Topline growth seems sustainable longer-term given end-market exposure, liquidity and leverage remain healthy, global share trends impressive, and emerging market trends increasingly reassuring, yet valuation is still discounted relative to other larger CPG multinationals. We continue to see 15%+ upside in the stock over the NTM, as long as the unknowns (COVID, Brexit, and U.S. tax policy) prove to be limited shocks,” Dickerson added.

Mondelez shares closed 2.29% higher at $54.34 on Monday; however, the stock is down around 1% so far this year.

Executive Comments

“Our third-quarter performance was strong across all key metrics, with broad-based revenue growth as demand remained elevated in Developed Markets and sequentially improved in Emerging Markets,” said Dirk Van de Put, Chairman and Chief Executive Officer.

“Our strategy remains unchanged and we are accelerating certain initiatives and increasing the investment behind our brands to further support long-term sustainable growth.”

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Mondelez Stock Price Forecast

Six equity analysts forecast the average price in 12 months at $64.50 with a high forecast of $68.00 and a low forecast of $60.00. The average price target represents an 18.70% increase from the last price of $54.34. From those six analysts, five rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $63 with a high of $75 under a bull-case scenario and $39 under the worst-case scenario. The firm currently has an “Overweight” rating on the world’s largest snack company’s stock. Jefferies Financial Group raised their target price on Mondelez International to $64 from $60 and gave the company a “buy” rating. Barclays restated a “buy” rating and set a $62 target price.

Several other analysts have also recently commented on the stock. Piper Sandler raised their target price to $66 from $60 and gave the company an “overweight” rating. Seaport Global Securities set a “buy” rating and a $61 target price. At last, Sanford C. Bernstein restated a “buy” rating.

Analyst Comments

“Mondelez (MDLZ) is our top pick in food. We believe MDLZ’s long-term organic sales growth has accelerated sustainably to the ~3.5% level after an expected COVID depressed 2020 at 3%, driven by: (1) Favorable geographic/category exposure (emerging markets and snacking categories); (2) strategic changes (focus on local brands and topline expansion, changes in incentive comp); (3) market share trends improving from higher investment and supply chain benefits; and (4) US topline growth trends accelerating with strong market share,” said Dara Mohsenian, equity analyst at Morgan Stanley.

“We argue MDLZ’s topline/EPS growth profile is more similar to mega-cap CPG peers (KO/PEP/PG/CL), and valuation looks compelling at a nearly ~20% discount to mega-cap CPG peers.,” Mohsenian added.

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