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Here’s What’s Drove Mondelēz’s 1Q17 Bottom Line Beat

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EPS surpassed estimates

Mondelēz International (MDLZ) reported its 1Q17 results after the markets closed on May 2, 2017. The stock had risen ~3.4% as of about 10:10 AM EST on May 3, 2017.

The company’s adjusted EPS (earnings per share) of $0.53 handily exceeded Wall Street analysts’ consensus estimate of $0.50 and rose 3.9% YoY (year-over-year) on the back of higher pricing, growth in emerging markets, and stringent cost-control initiatives.

As we can see in the graph above, Mondelēz has exceeded analysts’ earnings expectations in seven of the past nine quarters despite a challenging landscape.

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Cost savings driving growth

Packaged food and snacking manufacturers are having a tough time, especially in the United States (SPY) as consumers shift toward healthy snacking options. Amid this slow growth environment, the companies operating in this space are banking on new innovative products coupled with productivity and cost-saving initiatives to drive bottom-line growth.

Rival The Hershey Company (HSY), which reported its 1Q17 results on April 26, 2017, marked a 19.1% rise in its bottom line due to strong sales of its new products and cost-saving initiatives. Meanwhile, packaged food manufacturers such as The Kellogg Company (K) and ConAgra (CAG) are also focusing on lowering costs to boost profitability.

Outlook

Despite a challenging operating landscape, Mondelēz’s management remains upbeat and projects double-digit adjusted EPS growth on a constant-currency basis for 2017.  The company’s planned innovation pipeline for 2H17, traction in the well-being segment, enhanced distribution channel, growth rebound in key markets such as India, and tighter cost-control measures are likely to boost its bottom line results.

However, 2Q17 is likely to remain a challenge. Sluggish sales growth in North America and increased spending could pressure margins and, in turn, the company’s bottom line. Moreover, macroeconomic challenges in Brazil and falling sales in China could dent the company’s EPS growth.

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

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