• 
• See all for Midnight Trader
• View Print Version

• Real Time Analyst Upgrades/Downgrades
• Real Time Stock News & Trading Ideas
• Free Earnings Calendar

• KRFT 100% Rate It
• MDLZ 71% Rate It

ASSUMING Coverage with an OUTPERFORM Rating and TP of $31 (previously $45); Due to Strong Growth Prospects

Following the spin off of Kraft Foods Group ( KRFT ) out of the parent company Kraft Foods, we are assuming covering on the remaining Kraft business, now renamed Mondelez ( MDLZ ). We are lowering our estimates on Mondelez to $1.58 for 2013 and $1.80 for 2014 to reflect the new, smaller business.

Our target price of $31/share (from $45/share) is based on a 17x P/E against our 2014 estimate, reflecting a 15% premium to Mondelez' peer group but in-line with international packaged goods companies of similar size and growth profiles, like Nestle, Colgate, and Unilever. We think Mondelez deserves a valuation multiple in this neighborhood due to its top-line sales growth profile (5-7%), its strong EPS growth profile (low-to-mid teens) and its strong and profitable emerging market platform (44% of sales with margins in double-digits).

We believe that the company is poised for positive earnings revisions in 2013. The guidance of $1.50-$1.55 assumes continued headwinds from a weaker Euro. Since management gave this guidance in early August, the Euro has strengthened enough to add $0.04-$0.05 to our estimates. In addition, earnings are temporarily depressed by inefficiencies related to the spin and dis-synergies, which will melt away. In total, we believe the company's true earnings power is closer to $1.62, which management could either choose to realize right away, or reinvest to secure a big step in 2014 to $1.80.

Related Commodities Articles

• 
  Market Wrap for Monday, May 20: Stocks Record Very Minor Losses; Greenback Falls Versus Euro
  5/20/2013 04:25 PM
• 
  Gold and Silver Divergence Suggest Lows Could Form
  5/20/2013 04:24 PM
• 
  Crude Oil Is Pushing Hard on Resistance
  5/20/2013 03:35 PM