Mondelez International, Inc.
) beat the Zacks Consensus Estimate for the earnings but missed
the same for revenues in the second quarter of 2013. The maker of
Oreo cookies and Cadbury chocolates maintained its outlook for
organic revenues and earnings for fiscal 2013.
Adjusted earnings of 37 cents per share in the second quarter of
2013 beat the Zacks Consensus Estimate of 35 cents by 5.7%. On a
currency-neutral basis, earnings improved 5.6% from the
prior-year quarter. The earnings growth was driven by solid
organic revenue growth.
Mondelez International focuses on the global food and snacks
business of the erstwhile Kraft Foods. The old Kraft Foods was
spun off from its North American grocery business into a separate
Kraft Foods Group, Inc.
) in October last year.
Revenues & Margins
Net revenue in the quarter improved 0.8% year over year to $8.60
billion. Revenues missed the Zacks Consensus Estimate of $8.63
million by 0.4%. However, organic revenues (excluding impact from
acquisitions, divestures and foreign exchange) of $8.73 billion
increased 3.8% driven by an increase in emerging markets,
favorable volume/mix, strong performance of Power Brands and
increase in global market share.
Organic top line growth was however much lower than the company's
long-term target range of 5%-7% growth. Lower coffee pricing,
capacity constrains in a number of markets and continued weakness
in its gum business hurt organic revenue growth in the quarter.
Lower coffee prices adversely affected top line growth by around
0.8 percentage points (pp) while capacity constraints created a
headwind of 0.2 pp. Volume/mix benefited the top line by 3.6 pp
while pricing added 0.2 pp.
Mondelez's Power Brands grew 7.9% in the quarter while revenues
from emerging markets were up 9.7% mainly due to strong growth in
Among the food categories, biscuits, chocolates and coffee were
up in the quarter, while the gum and candy business was down. The
company's gum business has been down since the last few quarters,
mainly in the developed nations.
Adjusted gross margins declined 20 basis points (bps) in the
quarter to 37.8% as gains from volume/mix and pricing were offset
by headwinds from higher input costs.
Adjusted operating income declined 9.3% year over year to $1.0
billion on a constant currency basis due to higher spending for
advertising, consumer support, sales capabilities and
route-to-market expansion in emerging markets. Adjusted operating
margin declined 1.8 basis points in the quarter to 11.4%.
Revenues declined 0.1% to $1.34 billion. Organically, revenues
increased 9.6%, driven largely by price increases but partially
offset by volume/mix. Brazil was up in double digits, driven by
volume/mix gains and higher pricing. Adjusted segment operating
income declined 23.5% on a constant currency basis to $166
million due to higher investments in sales capabilities and
Revenues grew 1.5% to $1.24 billion. Organically, revenues
increased 3.3% driven by volume/mix gains. Double-digit growth in
emerging markets of China, India and Philippines was offset by
mid single-digit decline in the developed markets, due to
weakness in gum and candy. Adjusted segment operating income
decreased 13.8% on a constant currency basis to $137 million.
Eastern Europe, Middle East & Africa:
Revenues grew 7.7% to $1.04 billion. Organically, revenues
increased 11.3% as volume/mix gains were offset by lower coffee
pricing. Russia grew mid teens despite the pricing pressure due
to strong volume/mix performance. Adjusted segment operating
income declined 0.7% on a constant currency basis to $143 million
due to higher investments in sales capabilities and advertising,
which also hurt profits.
Revenues declined 1.3% to $3.27 billion. Organically, revenues
increased 0.2% as volume/mix gains mainly in chocolates, coffee
and biscuits were offset by lower coffee pricing and weakness in
gum and cheese. Adjusted segment operating income declined
7.6% on a constant currency basis to $401 million.
Revenues grew 1.1% to $1.70 billion. Organically, revenues
increased 2.3% driven by solid biscuit sales in the U.S. However,
the gum business continued to decline. Adjusted segment operating
income rose 0.4% on a constant currency basis to $226 million due
to lower gross margins resulting from weak gum sales.
The company recently hiked its third quarter dividend by 8% to 14
cents per share. The dividend is payable on Oct 15, 2013, to
stockholders of record as of Sep 30, 2013. This marks the
first dividend hike since 2008.
The company recently increased its share repurchase authorization
to $6 billion through 2016, up from the previous authorization of
$1.2 billion. The company intends to repurchase $1-2
billion of shares annually.
Mondelez retained its 2013 outlook for revenues and earnings. The
company expects earnings per share in the range of $1.55-$1.60
For 2013, Mondelez continues to expect its organic top line to
grow at the lower end of its long-term range of 5%-7%. However,
top line growth is expected to accelerate in the second half
driven by Mondelez's growth initiatives. The company also expects
its margins to improve in the second half of the year.
The stock carries a Zacks Rank #4 (Sell).
Consumer staples stocks that are worth considering include
B&G Foods Inc.
Dole Food Company Inc.
). Both B&G Foods and Dole Food Company carry a Zacks
Rank #1 (Strong Buy).
B&G FOODS CL-A (BGS): Free Stock Analysis
DOLE FOOD CO (DOLE): Free Stock Analysis
KRAFT FOODS GRP (KRFT): Free Stock Analysis
MONDELEZ INTL (MDLZ): Free Stock Analysis
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