U.S. markets close in 3 hours 1 minute
  • S&P 500

    +47.59 (+1.09%)
  • Dow 30

    +409.50 (+1.21%)
  • Nasdaq

    +136.83 (+0.93%)
  • Russell 2000

    +34.51 (+1.58%)
  • Crude Oil

    +1.67 (+2.37%)
  • Gold

    +0.60 (+0.03%)
  • Silver

    +0.30 (+1.32%)

    +0.0010 (+0.08%)
  • 10-Yr Bond

    -0.0100 (-0.76%)

    -0.0010 (-0.07%)

    +0.3800 (+0.35%)

    +929.34 (+2.19%)
  • CMC Crypto 200

    +47.05 (+4.52%)
  • FTSE 100

    +102.39 (+1.47%)
  • Nikkei 225

    -200.31 (-0.67%)

Mondelez (MDLZ) Benefits From Lucrative Buyouts, Saving Efforts

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Mondelez International, Inc. MDLZ is benefiting from its lucrative acquisitions and effective cost-saving efforts. Moreover, the company’s focus on innovation and brand building has been aiding growth. That said, weakness across some emerging markets, coupled with strained margin, are concerning. Let’s discuss further.

What’s Working in Mondelez’s Favor?

Mondelez is always keen on expanding its business through acquisitions. Evidently, the company recently unveiled that it has signed an agreement to acquire a renowned Australia-based food company — Gourmet Food Holdings Pty Ltd. Notably, Gourmet Food holds a firm position in premium crackers and biscuits segments across Australia and New Zealand (ANZ) with impressive brands like Olina’s Bakehouse, OB finest and Crispbic. Certainly, the addition of Gourmet Food to Mondelez’s solid biscuit brands portfolio (with Oreo and belVita brands) will accelerate its growth in the snacking space, with improved presence in ANZ.

In January 2021, the company acquired Hu Master Holdings, the parent company of Hu Products. Notably, the acquisition of Hu will provide further growth opportunities in chocolate and cross-category potential in crackers for Mondelez. Moreover, the deal will provide the company important opportunities to grow its distribution network that includes e-commerce as well as premium conventional retail channels. Apart from these, in April 2020, the company acquired majority interest in Give & Go– a pioneer in fully-finished sweet baked goods. Give & Go’s fast-growing in-store bakery channel is likely to help the company further expand its snacking business.

Moreover, the company has been refreshing its brand portfolio through product innovation and also extending its brands to newer geographies and platforms. Mondelez’s continued product innovation under the SnackFutures platform bodes well. In fact, management plans to focus on enhancing the snacking portfolio, an area growing rapidly across the globe. Speaking of brand-building efforts, Mondelez has been increasing investments in in-store execution and advertising to support the Power Brands and innovation funded by cost savings. Such investments are helping the company witness growth in key brands.

Hurdles in the Way

Mondelez has been facing weakness in some emerging markets for a while now. During the fourth quarter of 2020, Mondelez’s revenues from emerging markets declined 2.5% year over year. Although management is generally witnessing rebound in emerging markets, various economic challenges and headwinds related to increased Gum & Candy exposure in a small group of markets is a concern. Apart from this, Mondelez’s adjusted gross profit margin contracted 80 basis points to 39.2% during the quarter. The downside was caused by escalated raw material costs.

Nevertheless, Mondelez’s focus on cost-saving endeavors, along with the aforementioned upsides, is likely to help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles. Notably, the company has been undertaking some major steps to enhance savings, which aid fueling margins and cash flow. It is also on track with eliminating other unnecessary costs from supply chain. During its fourth-quarter earnings call, management highlighted that it is on track to simplify operations by reducing the number of low-turn SKUs from the portfolio. In fact, the company expects to keep working in this area during 2021.

Shares of Mondelez have gained 17.2% in a year compared with the industry’s growth of 35.4%.

Better-Ranked Food Stocks

The Hain Celestial HAIN, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 26.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medifast, Inc. MED, currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 17.4%, on average.

The J. M. Smucker Company SJM, currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 1.7%.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?

Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2021 today >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Hain Celestial Group, Inc. (HAIN) : Free Stock Analysis Report

The J. M. Smucker Company (SJM) : Free Stock Analysis Report

MEDIFAST INC (MED) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research