Sales and earnings growth rate to stay low
Mondelēz (MDLZ) is scheduled to announce its first-quarter earnings results on April 30. Analysts’ consensus estimates indicate that Mondelēz’s top and the bottom lines are expected to stay low and mark YoY (year-over-year) declines. Mondelēz was among the few packaged food companies that impressed with their sales and margin performances in 2018. However, currency volatility has dragged its net sales down in the past couple of quarters.
We expect adverse currency rates to continue hurt the company’s top line growth. However, its base business is likely to sustain momentum driven by increased pricing and robust growth in emerging markets, primarily in India, Russia, and China.
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Mondelēz’s gross margins could continue to expand driven by an increase in pricing, cost savings, and favorable cocoa costs. However, higher freight and logistics costs could continue to hurt it. A planned increase in investments and higher interest expenses are also likely to hurt Mondelēz’s bottom line.
Stock performance so far in 2019
Mondelēz stock has outperformed the broader markets and is up 25.4% so far this year. In comparison, the S&P 500 Index has risen 16.0%. Continued strength in its base business, a strong performance in emerging markets, and margin expansion have driven Mondelēz stock higher.
Shares of other major food companies have also generated stellar returns so far this year. Conagra Brands (CAG), General Mills (GIS), and the J.M. Smucker Company (SJM) are up 44.6%, 32.9%, and 29.7%, respectively, year-to-date as of April 22. Meanwhile, the Hershey Company (HSY) stock is up 9.2% so far this year.
Most analysts suggest “buys” on Mondelēz (MDLZ) stock, reflecting continued strength in its base business.
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