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Mondelēz: Improved Base Business Supported Q1 Earnings Beat

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Key takeaways

Mondelēz (MDLZ) posted mixed first-quarter results after the markets closed on April 30. Mondelēz’s top line fell short of analysts’ estimate, which reflected negative currency rates. However, the company’s organic sales continued to grow due to balanced growth in volumes and pricing, which was impressive.

Mondelēz’s gross margin continued to expand. The higher gross margin reflected productivity savings, volumes leverage, and higher pricing, which more than offset the cost headwinds. However, the adjusted operating margins remained flat on a YoY (year-over-year) basis. Investments in growth measures offset the benefits from gross margin expansion.

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Improved organic sales, lower taxes, and share buybacks supported the company’s first-quarter adjusted earnings. The first-quarter earnings beat analysts’ estimate. However, currency volatility limited the growth rate.

Higher volumes and pricing helped Hershey’s (HSY) report better-than-expected sales and earnings in the first quarter. However, currency volatility had a negative impact on the sales and earnings growth rate.

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Stock performance

Mondelēz shares rose 1.8% in the after-hours of trading following the sustained growth in the base business. Mondelēz stock has risen 27.0% on a YTD (year-to-date) basis as of April 30. The stock has outperformed broader markets. In comparison, the S&P 500 Index has risen 17.5% in 2019.

Other major food stocks have also registered stellar growth in 2019. Conagra Brands (CAG), J.M. Smucker (SJM), General Mills (GIS), Campbell Soup (CPB), and Hershey shares have risen 44.1%, 31.2%, 32.2%, 17.3%, and 16.5%, respectively.

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