Mondelez (MDLZ) Up 25% in 3 Months on Strong Brands & Savings

With prudent buyouts, innovations and efforts to boost savings, Mondelez International, Inc. MDLZ is striking the right chords to maintain strong footing in the food space and boost investor’s optimism. The company, popular for chocolates and other snacking delicacies, has ralied 25.7% in the past three months compared with the industry’s rise of 9.7%. Let’s take a closer look at the factors aiding this Zacks Rank #3 (Hold) stock.

Measures to Strengthen Portfolio

Mondelez boasts a strong portfolio, which is adorned with popular brands like Cadbury, Toblerone, Milka, Tang powdered beverages and Halls candies among others.  Moreover, the company is keen on expanding business through acquisitions. In July 2018, it completed the acquisition of 13.8% ownership in the Keurig Dr Pepper business. Prior to this, Mondelez concluded the buyout of Tate’s Bake Shop, one of the fastest-growing biscuit brands in the United States. This buyout has been driving revenues for a while. Also, in January 2018, the company teamed with Post Consumer Brands — a business unit of Post Holdings POST — to create two cookie-inspired breakfast cereals.

Further, Mondelez is refreshing its portfolio through innovations and extending its brands to newer geographies and platforms. In this respect, it has been striving to expand the snacking portfolio and has accordingly developed the SnackFutures innovation hub.  As part of this platform, the company recently made investments in Uplift Food, a start-up firm engaged in developing prebiotic functional foods.

Other Growth Oriented Moves

The company is increasing investment toward in-store execution and advertising to support Power Brands. Moreover, to strengthen presence across digital media, it has formed strategic partnerships with biggies like Facebook FB and Amazon AMZN. Further, the company is improving presence in high-growth channels like e-commerce, discounters, convenience stores and traditional trade.

Also, Mondelez is undertaking major initiatives to enhance productivity savings that are fueling margins, cash flow and returns on invested capital. Such initiatives have supported the company’s profitability in the fourth quarter of 2018. The company’s disciplined pricing efforts have also been yielding results.

Wrapping Up

We note that Mondelez is exposed to significant currency fluctuation risks. In fact, during the fourth quarter, adverse currency movements dented the top line. Going ahead, management predicts currency movements to mar performance in 2019. Furthermore, rising raw material costs as well as selling, general and administrative expenses are a threat to the company’s profitability.

Nevertheless, we expect the company to tide over such hurdles on the back of efficient cost-minimization efforts. Moreover, the company’s brand building moves are yielding and are expected to aid sufficient revenue growth to cushion the shortcomings. That said, we expect the company to continue in investors’ good books.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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