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Analyzing Mondelēz’s Q1 Earnings Beat

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Earnings beat the expectations

Mondelēz (MDLZ) posted stronger-than-expected first-quarter earnings. The company’s adjusted EPS of $0.65 beat analysts’ estimate of $0.61 and rose 3.2% on a YoY (year-over-year) basis. On a constant-currency rate basis, Mondelēz’s bottom line rose 12.7% during the reported quarter.

Mondelēz’s first-quarter bottom line benefited from balanced growth in the volumes, mix, and pricing. The lower effective tax rate contributed $0.02 to the EPS. Share repurchases added $0.02 to the first-quarter adjusted earnings. However, currency volatility had a negative impact on the bottom line by $0.06.

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Mondelēz’s adjusted gross profit margins expanded by 30 basis points to 39.7%, which reflected improved organic sales and productivity savings. However, the adjusted operating margins were flat at 16.7%. The benefits from gross margin expansion were offset by cost headwinds and increased investments in growth.

Hershey (HSY) posted double-digit bottom-line growth in the first quarter. Expanded margins, lower taxes, and productivity savings drove Hershey’s better-than-expected EPS. Hershey’s adjusted gross margin increased by 80 basis points to 45.7%. The company’s adjusted operating margin increased by 160 basis points to 23.3%

General Mills (GIS) and J.M. Smucker (SJM) had improved margins during the last reported quarter. However, their bottom lines are under pressure, which reflects increased interest expenses and cost headwinds.

Outlook

Mondelēz’s management reaffirmed its previous guidance. The company expects the adjusted EPS to increase 3%–5% in 2019 on a constant-currency basis. Continued growth in the base business and productivity savings are expected to support Mondelēz’s bottom line in 2019. However, cost headwinds and negative currency rates are expected to have a negative impact.

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