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Why Mondelēz Stock Is Declining despite Improved Sales

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Mondelēz underperforming broader market

Mondelēz (MDLZ) sustained its sales growth momentum and reported YoY (year-over-year) improvement in its top line over the past two consecutive quarters. Mondelēz’s top line declined in 15 consecutive quarters before 3Q17, reflecting divestitures and soft demand for packaged foods in North America.

Despite the company’s sales returning to a growth trajectory and its EPS marking a double-digit growth, Mondelēz stock is showing a downtrend after its fourth-quarter results. On a YTD (year-to-date) basis, Mondelēz stock is down about 2.0% as of March 21, 2018, and has underperformed the broader index, which is up about 1.4%.

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What’s behind the downtrend?

During the last reported quarter, Mondelēz’s top line gained from improved pricing and favorable currency rates. However, volumes were only a shade higher (+0.3%) on a YoY basis. Mondelēz’s volumes declined in Latin America, while they remained weak in Europe and North America.

Going forward, the company expects its organic sales to register 1.0%–2.0% growth in 2018, which seems low given the strength in its power brands and traction in its wellness portfolio. The company’s volumes could remain weak given the soft demand for packaged foods.

However, the company’s net sales are projected to benefit from favorable currency rates, which are expected to contribute about 4.0% to its sales growth rate.

Among Mondelēz’s peers, General Mills (GIS), Campbell Soup (CPB), Conagra Brands (CAG), and Kellogg (K) are also expected to report soft organic sales in coming quarters.

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