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Mondelēz’s Q2 Earnings: Key Takeaways


Jul. 31 2019, Published 7:29 a.m. ET

  • Mondelēz posted its second-quarter results yesterday.
  • Q2 sales beat analysts’ estimate on the back of continued growth in organic sales.
  • Emerging markets recorded stellar growth, driven by India and China.
  • Earnings came in line with the estimate.
  • Management raised full-year organic sales and EPS outlook.

Mondelēz (MDLZ) announced its second-quarter earnings after the markets closed on July 30. The company’s sales came in ahead of analysts’ estimate, reflecting sustained momentum in organic sales. Balanced growth in volumes, mix, and pricing drove the underlying revenues. However, net sales declined on a YoY basis as currency headwinds remained a drag.

Margins stayed flat during the reported quarter. Benefits from volumes growth and cost-saving initiatives were offset by operational issues in Brazil and stepped up investments.

Mondelēz’s second-quarter earnings improved on a YoY basis, driven by share repurchases. However, earnings came in line with analysts’ estimate as operational issues remained a drag.

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Mondelēz: key financial metrics

Mondelēz posted net sales of $6.1 billion, which fell 0.8% YoY but came in marginally ahead of analysts’ estimate. Organic sales increased by 4.6%, led by 3.0% growth in pricing and a 1.6% rise in volume and mix. Rival Hershey (HSY), which posted second-quarter earnings on July 25, also impressed with its underlying sales. Higher net selling prices and favorable input cost trends drove Hershey’s organic sales and margins. As a result, Hershey stock is scaling new highs thanks to the improvement in the base business.

As for Mondelēz, its adjusted gross margin stayed flat at 40.6%. Margins gained from volume leverage and cost savings. However, production delays and issues with some delivery services in Brazil remained a drag. Operating margin also remained flat at 16.7%.

Mondelēz posted adjusted EPS of $0.57 per share, which came in line with analysts’ expectation and increased 3.6% YoY. Share repurchases supported bottom-line growth. However, currency volatility and increased investments restricted growth.

Mondelēz’s Q2 organic sales by region

Emerging markets recorded robust growth, driven mainly by the stellar sales in India and China. Organic sales in the Asia, the Middle East & Africa (or AMEA) region increased by 4.7%. Volumes rose 2.8%, while net selling prices increased by 1.9%.

Within AMEA, India and China posted double-digit growth. Sales in India benefitted from momentum in chocolate and biscuits. Meanwhile, innovation and distribution gains supported sales in China. Underlying sales in Latin America jumped 10.9% driven primarily by higher pricing, which increased by 11.5%. In the corresponding quarter of 2018, the company faced a trucker strike, which helped YoY comparisons for the reported quarter.

Organic sales in Europe rose 3.9%, reflecting growth in the UK and Germany. Advertising and consumer promotions supported sales growth. In North America, organic sales increased by 2.5%, reflecting higher pricing (+3.5%). However, volumes fell 1.0%.

Management raised outlook

Buoyed by a strong performance in the first half of 2019, management raised the full-year sales and EPS outlook. Mondelēz’s organic revenues are now expected to increase by over 3% in 2019. Earlier, management forecasted growth of 2% to 3%.

Adjusted EPS is expected to increase by about 5% on a constant currency basis. Previously, management expected earnings to grow by 3% to 5%.


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