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Mondelez (MDLZ) Down 2.6% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Mondelez (MDLZ). Shares have lost about 2.6% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mondelez due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Mondelez Q1 Earnings Top Estimates, Cost Woes Linger

Mondelez International reported robust first-quarter 2022 numbers. Adjusted earnings came in at 84 cents per share, which increased by 13.9% year over year on a constant-currency or cc basis. The metric surpassed the Zacks Consensus Estimate of 74 cents per share. The year-over-year upside was backed by reduced outstanding shares, decreased interest expenses and operating gains. This was partly countered by higher taxes and reduced benefit plan non-service income.

Net revenues advanced 7.3% to $7,764 million, which beat the Zacks Consensus Estimate of $7,482 million. The uptick was driven by strong organic net revenues of 5.4% and increased sales from the Chipita, Grenade and Gourmet Food buyouts, somewhat negated by currency headwinds. Favorable volumes and pricing contributed to organic net revenues.
Revenues from the emerging markets increased by 15.6% to $2,964 million while rising 16.5% on an organic basis. Revenues from developed markets moved up 2.7% to $4,800 million while increasing 4.2% on an organic basis.
 
Region-wise, revenues in Latin America, Asia, Middle East & Africa, Europe and North America increased by 23.5%, 7%, 3.1% and 8% year over year, respectively. On an organic basis, revenues increased by 25.7%, 8.9%, 4.9% and 7.7% in these regions, respectively.
 
Adjusted gross profit ascended $283 million at cc. The adjusted gross profit margin contracted by 80 basis points (bps) to 38.8% due to increased raw material and transportation costs and an unfavorable mix. These were somewhat negated by favorable pricing, volume leverage and productivity.

Mondelez’s adjusted operating income rose $175 million at cc. The adjusted operating income margin contracted by 20 bps to 17.7% due to inflated input costs and an adverse mix, largely countered by SG&A leverage and favorable pricing.

Other Financials

Mondelez ended the quarter with cash and cash equivalents of $1,946 million, long-term debt of $18,344 million and total equity of $28,216 million. MDLZ generated net cash from operating activities of $1,131 million during the three months ended Mar 31, 2022.

Free cash flow was $1 billion during the same period. Management expects a free cash flow of more than $3 billion in 2022. During the quarter, the company distributed $1.2 billion to shareholders through cash dividends and share buybacks.

Guidance

Management revised its guidance for 2022, which reflects anticipation of continued top-line growth, elevated cost of goods sold inflation, the timing impact of extra pricing actions and the impacts of the Ukraine war.

For 2022, management now expects organic net revenues of more than 4% compared with the more than 3% growth expected earlier. The updated view reflects a sturdy first-quarter performance, together with strong pricing associated with higher input costs. Management now envisions mid-to-high single-digit growth in adjusted earnings per share or EPS at cc, down from a high single-digit increase forecast before. This reflects the impacts of the Ukraine war and escalated material commodity costs, mainly due to elevated energy costs.
 
Currency movements are likely to negatively impact net revenues by nearly 3% and adjusted EPS by 17 cents in 2022.

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How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Mondelez has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mondelez has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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