Categories Analysis, Consumer

Mondelez International (MDLZ): Here are a few points to keep in mind if you have an eye on this confectionary giant

The company expects organic revenue to grow more than 10% in FY2022

Shares of Mondelez International, Inc. (NASDAQ: MDLZ) stayed green on Wednesday. The stock has gained 12% over the past one month. The company delivered solid results for the third quarter of 2022 last week and hiked its outlook for the full year. Here are a few points to keep in mind if you are considering this stock:

Revenue and profitability

Mondelez delivered strong revenue and earnings growth for the third quarter of 2022. Net revenues rose 8.1% year-over-year to $7.7 billion, driven by organic revenue growth of 12% and incremental sales from the Clif Bar and Chipita acquisitions. The top line benefited from broad-based revenue growth across emerging and developed markets, effective pricing and solid volume growth during the quarter.  

In emerging markets, revenues grew nearly 20% while developed markets saw growth of 1.5%. The company also recorded revenue increases across most of its geographies, with the highest growth coming from Latin America at nearly 22% and North America at around 20%.

Adjusted EPS in Q3 increased 15.7% on a constant currency basis to $0.74, driven by factors such as strong operating gains and lower taxes.

Based on the strength of its results, Mondelez raised its revenue and profit guidance for the full year of 2022. The company now expects organic revenue to grow more than 10% versus its previous outlook of more than 8% growth. Adjusted EPS is now expected to grow over 10% on a constant currency basis versus the prior outlook of mid to high single digits. It expects to see broad-based growth in its core categories and markets with a significant contribution from pricing.

Category resilience and brand strength

Mondelez continues to see strong demand for its brands as snacking trends remain steady. Amid the ongoing inflation, the company is seeing consumers in developed markets prioritize their spending on groceries while also making room for its brands which they see as ‘affordable indulgences’. The confectionary giant is also seeing growing demand and brand loyalty in emerging markets.

The company’s core categories of chocolate and biscuits delivered strong performances with organic revenue growth of 9% and 11.5% respectively during the third quarter. These categories witnessed meaningful growth in both developed and emerging markets with momentum in brands like Oreo, Cadbury Dairy Milk and Toblerone.

Biscuits are seeing strong demand in the US as they are a preferred choice for school lunches while chocolates remain popular in Europe for gifts and treats. This momentum is expected to continue in Europe during the Christmas season as consumers plan to spend more money at home and on gifting. In Q3, the chocolate category held or gained share in 65% of Mondelez’s revenue base while the biscuits category held or gained share in 35% of its revenue base.

Like most companies, Mondelez is facing high input cost inflation and it has rolled out price increases across many of its key markets to tackle this issue. Additional pricing actions are expected to take effect across several markets, including the US, in December. Looking ahead, Mondelez expects to see double-digit cost inflation for the year.

Acquisitions

Mondelez has made a couple of acquisitions that will help expand its offerings and drive growth. The acquisition of Greek food company Chipita will help Mondelez drive growth in the biscuits and baked snacks category in Europe. The acquisition of Clif Bar & Company has helped Mondelez expand its snack bar business to over $1 billion and the purchase of Mexican confectionary company Ricolino has broadened its reach in the Mexican market.

Click here to read the full transcript of Mondelez’s Q3 2022 earnings conference call

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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