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Could Mondelēz’s 1Q17 Bottom Line Exceed Expectations?

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What analysts expect for 1Q17

Mondelēz International (MDLZ) is slated to report its 1Q17 results on Tuesday, May 2. On average, analysts expect the company to report adjusted EPS (earnings per share) of $0.50 in 1Q17, representing YoY (year-over-year) growth of 4.2% when compared with 1Q16.

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Earnings trend

As the chart above shows, Mondelēz has exceeded analysts’ earnings expectations in six of the past eight quarters despite a challenging landscape. Packaged food or snack manufacturers saw a tough year in 2016. Slow growth in the US (SPY), geopolitical challenges in key international markets, and extraordinary events such as the Brexit vote and demonetization in India took a toll on companies operating in this space.

Amid slow growth environment, packaged food and snack manufacturers including Hershey (HSY), Kellogg (K), and ConAgra (CAG) are focusing on productivity savings and lowering costs to drive growth in their bottom lines.

Similarly, Mondelēz’s bottom-line results mostly benefited from the company’s cost-cutting initiatives. In 4Q16, Mondelēz’s adjusted EPS jumped 12% YoY to $0.47, but they missed the analysts’ estimate by $0.01.

What 1Q17 could hold

The first quarter of 2017 could be yet another quarter in which the bottom-line results could benefit from operating efficiencies. Although the worst impact of demonetization in India has passed, Mondelēz’s (MDLZ) management expects 1Q17—and to some extent, its 2Q17 results—to feel an ongoing impacted. India remains one of the company’s most significant markets.

Also, macroeconomic challenges in Brazil and adverse currency movements could dent the company’s EPS growth.

We’ll discuss the expectations from Mondelēz’s sales in the next part of this series.

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