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Why Did Bill Ackman Reduce His Stake in Mondelēz International?

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Mar. 18 2016, Published 12:45 p.m. ET

Price movement of Mondelēz International

Mondelēz International (MDLZ) fell by 2.3% to close at $40.78 per share on March 17, 2016. Its price movement on a weekly, monthly, and YTD (year-to-date) basis is -2.1%, 2.4%, and -9.1%, respectively.

Currently, MDLZ is trading at 1.1% below its 20-day moving average, 0.04% above its 50-day moving average, and 4.2% below its 200-day moving average.

The Fidelity MSCI Consumer Staples ETF (FSTA) invests 3.6% of its holdings in Mondelēz International. The ETF tracks a market-cap-weighted index of stocks in the US consumer staples sector. The YTD price movement of FSTA was 3.9% as of March 17, 2016.

The market caps of Mondelēz’s competitors are as follows:

  • PepsiCo (PEP) — $147.2 billion
  • General Mills (GIS) — $36.7 billion
  • The Hershey Company (HSY) — $14.4 billion
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Pershing Square reduces its stake in Mondelēz

Bill Ackman’s Pershing Square Capital Management reduced its stake in Mondelēz International by 20 million shares worth $834 million. Valeant Pharmaceuticals International (VRX), in which Ackman is a big investor, fell on Tuesday after news of the drug company possibly defaulting on its debt.

Performance of Mondelēz International in 4Q15 and 2015

In 4Q15, Mondelēz International reported a net revenue of $74 billion, a fall of 16.6% from the net revenue of $8.9 billion in 4Q14. Its net income and EPS (earnings per share) fell to -$729.0 million and -$0.46, respectively, in 4Q15, compared with $500.0 million and $0.29, respectively, in 4Q14.

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Fiscal 2015 results

In fiscal 2015, MDLZ reported a net revenue of $29.6 billion, a fall of 13.5% YoY (year-over-year). Its net income and EPS rose to $7.3 billion and $4.44, respectively, in fiscal 2015, compared with $2.2 billion and $1.28, respectively, in fiscal 2014.

The price-to-earnings and price-to-book value ratios of Mondelēz International were 9.2x and 2.3x, respectively, as of March 17, 2016.

Projections

The company has made the following projections for fiscal 2016:

  • an organic net revenue growth of at least 2% including a headwind of up to 1.3% from trade optimization and the elimination of less profitable SKUs (stock keeping units)
  • an adjusted operating income margin in the range of 15% to 16%
  • double-digit adjusted EPS growth on a constant currency basis and currency translation to reduce adjusted EPS by ~$0.13

This outlook reflects the current challenging external conditions presented by slower economic growth and volatile commodity cost and currency environments. For fiscal 2018, the company expects an adjusted operating income margin in the range of 17%–18%. Now let’s look at Canon.

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