What Could Limit Mondelēz’s Sales and Earnings Growth?

Currency headwinds to hurt sales

Mondelēz’s (MDLZ) net revenues have declined in the last three quarters despite the continued growth in its organic sales. Foreign currency fluctuations have more than offset the benefits of the company’s strong performances in both emerging and developed markets. Its management expects adverse currency rates to hurt its net sales growth rate by 3% in 2019.

Wall Street expects Mondelēz’s top line to continue to decline in the second quarter of 2019. Its net revenues are expected to return to a growth trajectory in the second half, but its revenue growth is expected to stay low.

What Could Limit Mondelēz’s Sales and Earnings Growth?

The company’s organic sales are expected to continue to grow driven by the balanced growth in both its volumes and pricing. Mondelēz is expanding its snacking category with a focus on well-being snacks, which is likely to drive its organic sales.

Earnings face tough comparisons

Mondelēz’s bottom line has grown at a stellar rate in the past several quarters thanks to its robust organic sales, margin expansion, and lower effective tax rate. However, its EPS growth slowed during the first quarter of 2019, reflecting tough year-over-year comparisons and adverse currency rates.

Going forward, analysts expect Mondelēz’s bottom line to mark low-single-digit growth, as tough comparisons are expected to limit its growth rate. Mondelēz’s adjusted earnings are expected to benefit from margin improvements and a lower tax rate. However, currency volatility is likely to hurt it. The company’s management expects adverse currency rates to dent its adjusted EPS by $0.09 in 2019.