Mondelez International Inc. (NASDAQ: MDLZ): Comprehensive Analysis of a Global Snack Food Leader

Mondelez International Inc. (NASDAQ: MDLZ) is a global leader in the snacking industry, offering a diverse portfolio of beloved brands that include Oreo, Cadbury, Toblerone, Ritz, and Trident. Established in 2012 following its spin-off from Kraft Foods Inc., Mondelez has strategically positioned itself as a powerhouse in the snack food sector, operating in more than 160 countries.

The company’s mission is to lead the future of snacking by delivering a broad range of snacks that cater to the evolving tastes and preferences of consumers worldwide. With a focus on sustainability and innovation, Mondelez is committed to creating delicious moments of joy through its iconic products while maintaining a strong dedication to social responsibility and environmental stewardship.

Highlights and News Updates

• On July 31st, 2024, Mondelez International, Inc. reported better-than-expected second-quarter adjusted EPS results and raised its dividend. Mondelēz raised its quarterly dividend by 11% from 42.5 cents to 47 cents per share.

• On July 31st, 2024, Oreo-maker Mondelez said cookies remain a weak spot, though increased promotions are already helping revitalize some sales. The company said that its sales volumes declined, due in part to ongoing weakness in the company’s US cookie business.

• On July 31st, 2024, Mondelez International Inc. (MDLZ) filed a Form 8K – Operations and Financial Condition – with the U.S. Securities and Exchange Commission on July 30, 2024.

• On July 24th, 2024, Mondelēz International today announced the appointment of Filippo Catalano as Chief Information and Digital Officer (CIDO). Reporting directly to Chair and Chief Executive Officer Dirk Van de Put, Catalano will be responsible for accelerating the company’s global technology transformation to drive long-term growth.

Key Data

Second Quarter 2024 Highlights

• Mondelez reported US $8.34 billion in revenue for the quarter ended June 2024, representing a year-over-year decline of 1.9%. EPS of US $0.86 for the same period compares to US $0.76 a year ago.

• The adjusted gross profit increased 9.7% to US $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
  US $1.5 billion while the adjusted operating income margin expanded 270 bps to 17.9%.

Financials

The financial data from 2019 to 2023 reveals a positive trend in the company’s revenue and net income, reflecting its overall growth and profitability.

Starting with a revenue of US $25.87 billion in 2019, the company experienced steady growth each year, reaching US $36.02 billion by 2023. This upward trajectory underscores the company’s ability to increase its earnings consistently. Net income also demonstrated a strong performance, despite some fluctuations.

In 2019, the net income was US $3.93 billion, which increased to US $3.56 billion in 2020. Net income kept on increasing in 2021 to US $4.30 billion. However, 2022 saw a notable dip in net income to US $2.72 billion, suggesting potential challenges or increased expenses during that year. By 2023, net income recovered and peaked at US $4.96 billion, indicating robust profitability.

The consistent rise in revenue, peaking in 2023, aligns with the data, while the variability in net income is evident, with the dip in 2022 and the subsequent recovery in 2023. Overall, this highlights the company’s resilience and potential for future growth, despite encountering challenges along the way. The continuous increase in revenue and the rebound in net income by 2023 underscore the company’s strong financial health and strategic effectiveness.

The company’s financial performance over the quarters shows distinct trends and figures. Revenue saw a slight decline from US $9.31 billion in December 2023 to US $8.34 billion in June 2024, while the cost of revenue fluctuated, decreasing from US $5.84 billion in December 2023 to US $5.55 billion in June 2024.

Despite this decrease in costs, the gross profit dropped significantly, from US $4.75 billion in March 2024 to US $2.80 billion in June 2024, highlighting higher relative costs in the most recent quarter. Operating expenses, specifically Sales, General, and Administrative (SG&A) expenses, showed a downward trend, decreasing from US $2.15 billion in December 2023 to US $1.89 billion in June 2024. Non-recurring items varied, peaking at US $89 million in December 2023 before dropping to US $15 million in June 2024.

Operating income reflected these changes, with a significant decrease from US $2.73 billion in March 2024 to US $854 million in June 2024. Earnings Before Interest and Tax (EBIT) followed a similar trend, decreasing from US $2.75 billion in March 2024 to US $882 million in June 2024. Consequently, net income saw a sharp decline, dropping from US $1.41 billion in March 2024 to US $601 million in June 2024.

The company’s financial health in the quarter ending June 2024 was negatively impacted by the combination of lower revenue and higher costs, resulting in a decreased gross profit and net income. To improve financial performance, the company should focus on managing the cost of revenue to enhance gross profit margins, explore revenue-boosting strategies such as new product lines or market expansion, and review operational efficiencies to reduce costs without compromising quality.

From 2020 to 2023, the company’s debt profile reveals some significant trends. Total debt rose markedly in 2022 to approximately US $22.9 billion, but it subsequently decreased to about US $19.4 billion in 2023. This peak in 2022 was accompanied by a notable increase in long-term debt, which reached US $20.3 billion before falling to US $16.9 billion in 2023.

Short-term debt also fluctuated, with a high of US $2.8 billion in 2020 before slightly decreasing in the subsequent years to US $2.5 billion by 2023. Overall, total liabilities mirrored this pattern, spiking in 2022 to US $44.3 billion before declining to US $43.1 billion in 2023. This reduction in both short-term and long-term debt, coupled with the decrease in total liabilities, indicates that the company has successfully managed to reduce its debt burden following the 2022 peak. The strategic focus on lowering debt levels in 2023 reflects effective financial management and a concerted effort to stabilize the company’s financial position.

Right now, the EPS of the company is at US $3.62 compared to last year’s EPS of US $1.96.

Forecast

Right now, the company is trading at US $68.46, with a 1-year projected target of around US $78.65 and a low estimation of US $65.36; the average price target will be US $73.41.

Technical Analysis

• The price action analysis of the stock indicates a positive uptrend in the stock.

• Right now, the RSI (56.23) indicator is slightly more than 50 which shows it is a good time to invest in this stock. It is also giving a bullish divergence.

• The stock has the potential to bounce back up to 15% from the current market price.

Indicators Summary – Buy

• Market sentiments are bullish, and stocks can go up further.

• 100 days EMA and 50 days EMA also give a positive sign pushing the price upwards.

• Stock is above 100 days EMA.

• VWAP is also giving us a buy signal.

Risk factors

There are some risks involved with Mondelez International Inc.

• The company relies on agricultural commodities such as cocoa, sugar, and wheat. Volatility in these commodity prices can impact cost structures and profit margins.

• The snack industry is highly competitive, with numerous large and small players. Intense competition can impact market share and pricing strategies.

• Mondelez must comply with various regulations related to food safety, labeling, and environmental standards. Changes in regulations or non-compliance can affect operations and financial performance.

• Shifts in consumer preferences towards healthier or different types of snacks can impact Mondelez’s product demand. The company must continually innovate and adapt to changing consumer tastes.

• Mondelez has pursued growth through acquisitions. Integrating new acquisitions can be challenging and may not always yield the expected benefits.

Stock Recommendation

Mondelez International Inc. (MDLZ) presents an intriguing investment opportunity due to its strong brand portfolio and diverse revenue streams. The company’s portfolio of well-known snack brands reinforces its competitive advantage and substantial market share in the global snack food industry. Mondelez’s commitment to innovation and expanding its market footprint supports its growth potential. However, investors should consider potential risks such as fluctuations in commodity prices and economic conditions affecting international markets.

Additionally, the competitive landscape of the snack food industry adds another layer of complexity. For long-term investors, Mondelez’s stability and growth prospects might be appealing, but it’s crucial to evaluate how the stock aligns with your overall investment strategy and risk tolerance. Strategic initiatives, including acquisitions and partnerships, are expected to further enhance its market position.

Market Facts gives a “Buy” rating on the stock at the closing price of US $68.46 as of August 6th, 2024.

CMP (US)  (August 6, 2024)	$68.46
Target Price	$78.65
Recommendation	Buy

Disclaimer:

The information provided in this document and the resources available for download are intended for informational purposes only and should not be interpreted as financial advice. While the content is based on thorough research and is accurate to the best of our knowledge, it is not a substitute for professional financial guidance. We strongly recommend consulting with a financial advisor to discuss your specific situation and obtain tailored advice before making any financial decisions.