Mondelez International: A Sweet Spot in the Consumer Staples Sector

Mondelez International (MDLZ) is a name synonymous with indulgence and delight. As a global snacking powerhouse, it boasts an array of beloved brands, including Oreo, Chips Ahoy, Belvita, and TUC, catering to a wide spectrum of consumer preferences. In an era marked by economic volatility and inflationary pressures, Mondelez has demonstrated resilience through its robust revenue growth and an enduring commitment to shareholder value. In this article, we delve into the compelling story of Mondelez International, examining its financial performance, dividend prowess, and its positioning within the consumer staples sector.

Mondelez: A Snacking Behemoth

The Appeal of Iconic Brands

Mondelez International commands a unique position in the consumer goods landscape, with a treasure trove of iconic brands. The allure of products like Oreo cookies transcends borders, making them not just popular in the United States but sought after worldwide. The diverse portfolio of Mondelez brands provides the company with a distinct advantage during inflationary periods. Consumers tend to remain loyal to these beloved products, even in the face of modest price increases, as long as they remain within the bounds of inflation.

Stifel’s Vote of Confidence

The investment community recognizes the potential of Mondelez. Stifel recently raised its price target on Mondelez shares to $81 from $78, maintaining a Buy rating. While acknowledging challenges within the Americas Food group, Stifel notes that Mondelez represents an attractive opportunity in the current market landscape. The company’s discounted valuation, relative to its historical performance, has been influenced by weak volumes and an uncertain volume recovery. Stifel’s recommendation underscores the appeal of Mondelez as a promising investment option.

A Glimpse at the Financial Landscape

A Promising Trajectory

A closer look at Mondelez’s recent financial performance elicits optimism. For nearly half a decade, between 2016 and 2020, the company’s revenue remained stable at around $26 billion annually. However, 2021 marked the onset of a transformational shift, with the top-line revenue surging beyond $35 billion over the past four quarters. This growth trajectory surpasses the rate of inflation, a testament to Mondelez’s ability to adapt and thrive in changing economic conditions.

Mondelez’s gross profit has surged by 20% year-over-year, reflecting a $1.7 billion increase in the first nine months of the year. Notably, revenue in developed markets witnessed a robust 13.5% growth, while emerging markets, brimming with future opportunities, experienced an impressive 22.5% surge. Net income, which dipped in FY22 to $2.717 billion, rebounded significantly in the most recent quarterly report. It nearly doubled on a year-over-year basis, ascending from $2.142 billion in the first nine months of 2022 to an impressive $4.018 billion during the corresponding period in 2023. This resurgence in net income has propelled earnings per shareEarnings per share (EPS) is a fundamental financial metric that provides valuable insights into a company's profitability. This widely used indicator helps investors and analysts g... More (EPS) to nearly double, from $1.54 in the first nine months of 2022 to $2.92 in the corresponding period of 2023.

Prudent Liabilities Management

Mondelez has adeptly managed its liabilities over the past five and ten years. While total liabilities, encompassing long-term debt, have witnessed moderate increases, they have not outpaced the remarkable growth in revenue and income figures. For instance, in the 2013 annual report, Mondelez reported total liabilities of just under $40 billion, including nearly $14.5 billion in long-term debt. In contrast, the most recent quarterly report listed total liabilities at $42.3 billion, with $16.4 billion attributed to long-term debt. Current liabilities have risen by approximately $4.6 billion over the same period.

Mondelez’s financial health is further substantiated by its free cash flowThe cash flow statement provides a detailed overview of the cash inflows and outflows of a company over a specified period of time. It includes cash received from operations, inves... More, which stood at $2.4 billion in the most recent quarterly report. This figure has grown by $0.5 billion over the past year, reaffirming the company’s fiscal strength.

Valuation and Performance

Mondelez International is currently trading at approximately 22.4 times earnings. This valuation aligns with the company’s trading range over the past five years. Notably, the price-to-earningsThe price-to-earnings ratio, often abbreviated as P/E ratio, is a fundamental metric used by investors and analysts to evaluate the relative value of a company's shares in the stoc... More (P/E) ratio briefly dipped to 15.76 in March 2020, during the market’s pandemic-induced turmoil. However, both before and after this short-lived decline, the multiple consistently hovered in the 20 to 21 range. Over the past five years, Mondelez has maintained an average P/E ratio of 23.16. Despite this valuation range, the stock has delivered a robust return of 74% in terms of price appreciation during this period.

In the Final Analysis…

Bottom-line: Mondelez International (MDLZ) shines as a beacon of strength and stability within the consumer staples sector. Its portfolio of iconic brands, coupled with its ability to navigate inflationary environments, positions it as a formidable contender in the global snacking industry. Recent financial performance reflects Mondelez’s capacity for growth and adaptability. With its promising revenue trajectory, robust gross profitsIn the world of finance and accounting, the term "gross profit" holds significant importance as it provides a fundamental snapshot of a company's financial health. Also known as gr... More, and prudent financial management, Mondelez International remains a compelling choice for investors seeking a sweet spot in the consumer goods landscape.