On Apr 8, 2014, we issued an updated research report on
Mondelez International, Inc.
Mondelez's fourth quarter was worse than the third as it
missed the Zacks Consensus Estimate for both earnings and
revenues due to challenges faced by the snack category and
slowdown in the emerging markets.
The global snack powerhouse has been reporting disappointing
top-line results ever since it separated from
Kraft Foods Group, Inc.
). Weak biscuit sales in China, continued headwinds from coffee
pricing and slower global category growth hurt revenues in the
second half of 2013.
Though the company expects to do better in 2014, the first
quarter is expected to be tough as most of the headwinds that
hurt results in the second half 2013 are expected to persist.
Continued biscuit weakness in China, lower coffee pricing and
shift in Easter timing to the second quarter are expected to hurt
first-quarter sales. In fact, uncertain conditions in emerging
markets, low coffee pricing, gum weakness and tepid growth in
developed markets are clouding top-line visibility in 2014.
However, though sales have been slower, Mondelez has been
focusing on expanding margins through cost savings and
Mondelez is taking some major steps to improve margins, cash
flow and return on invested capital. The company is building an
integrated supply chain organization while simultaneously
restructuring its supply chain network and driving productivity
improvement through Lean Six Sigma, procurement transformation
and simplification. These efforts are expected to deliver $3
billion in gross productivity savings, $1.5 billion in net
productivity and $1 billion in incremental cash over the next
Supply chain/productivity savings, improved product mix and
overhead leverage are expected to help the company achieve 60-90
bps of annual operating margin improvement over the next three
years. Mondelez is primarily focusing on expanding operating
margins in North America and Europe by 500 bps and 250 bps,
respectively, by 2016. These margin improvements are expected to
fund growth in the emerging markets.
We are, thus, encouraged by this Zacks Rank #3 (Hold)
company'sstrong portfolio of iconic brands, potential for margin
expansion and commanding presence in the fast growing emerging
Other Stocks to Consider
Some better-ranked food stocks are
J&J Snack Foods Corp.
Diamond Foods, Inc.
). Both these stocks carry a Zacks Rank #2 (Buy).
DIAMOND FOODS (DMND): Free Stock Analysis
J&J SNACK FOODS (JJSF): Free Stock Analysis
KRAFT FOODS GRP (KRFT): Free Stock Analysis
MONDELEZ INTL (MDLZ): Free Stock Analysis
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