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Deutsche Bank Downgrades Mondelēz International

Gabriel Kane

Yesterday’s Consumer Pops and Drops: TTM, MDLZ, DLPH, CAJ, and CRI

(Continued from Prior Part)

Mondelēz International’s price movement

Mondelēz International (MDLZ) has a market cap of $66.1 billion. After Deutsche Bank downgraded the stock from “buy” to “hold,” Mondelēz International fell by 5.5% to close at $41.59 per share on January 7, 2016. The price movement on a weekly, monthly, and YTD (year-to-date) basis is -8.6%, -5.2%, and -7.3%, respectively.

Technically, the stock has broken support and is trading below all moving averages. Currently, Mondelēz International is trading 6.0% below its 20-day moving average, 6.4% below its 50-day moving average, and 0.68% below its 200-day moving average.

The PowerShares Dynamic Food & Beverage ETF (PBJ) invests 5.2% of its holdings in Mondelēz International. The ETF tracks a multifactor, tiered, and equal-weighted index of US food industry stocks. The YTD price movement of PBJ is -1.7% as of January 6, 2016.

Mondelēz International’s competitors and their market caps are as follows:

  • PepsiCo (PEP) – $143.9 billion
  • General Mills (GIS) – $34.1 billion
  • Kellogg (K) – $25.4 billion

Deutsche Bank downgrades Mondelēz International

Deutsche Bank has downgraded Mondelēz International’s rating from “buy” to “hold.” In fiscal 3Q15, the company reported 40% of its sales from emerging markets. On July 2, 2015, it combined its wholly owned coffee businesses with those of D.E Master Blenders 1753 to create a new company, Jacobs Douwe Egberts (JDE). It holds 43.5% equity interest in Jacobs Douwe Egberts and recorded a preliminary pre-tax gain of $7.1 billion on the contribution of its coffee businesses in fiscal 3Q15.

Mondelēz International’s performance in fiscal 3Q15

Mondelēz International (MDLZ) reported a fiscal 3Q15 net revenue of $6.8 billion, a fall of 17.8% from the net revenue of $8.3 million in fiscal 3Q14. It reported a gain on coffee business transactions and divestitures of $7.1 billion in fiscal 3Q15. Its net income and EPS (earnings per share) rose to $7.3 million and $4.46, respectively, in fiscal 3Q15, from a net income and EPS of $899.0 million and $0.53, respectively, in fiscal 3Q14.

Meanwhile, in fiscal 3Q15, its cash and cash equivalents rose by 25.9% and inventories fell by 26.5% from the prior year. Its debt-to-equity ratio fell to 1.21 in fiscal 3Q15 from a debt-to-equity ratio of 1.25 in fiscal 3Q14.

On October 20, 2015, it invested more than $50 million in a state-of-the-art local production facility to increase the demand of Cadbury Bournvita. On December 8, 2015, the company declared a regular quarterly dividend of $0.17 per share on its Class A common stock.

The PE (price-to-earnings) and PBV (price-to-book value) ratios of Mondelēz International are 8.0x and 2.2x, respectively, as of January 7, 2016.

The company has projected the following figures for fiscal 2015:

  • organic net revenue growth to rise by 3%
  • adjusted EPS to see double-digit growth on a constant currency basis
  • free cash flow excluding items to be ~1.0 billion

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