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Mondelez (MDLZ) Q1 Earnings Top Estimates, Cost Woes Linger

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Mondelez International, Inc. MDLZ reported robust first-quarter 2022 numbers, wherein the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. The solid top-line growth was backed by pricing and volume gains. The company’s chocolate and biscuit businesses largely drove revenues, profitability and free cash flow. The company witnessed strong demand in the emerging and developed markets, with all regions seeing growth.

Mondelez continued to witness increased input cost inflation, which is likely to persist throughout the year. However, management is undertaking necessary pricing, revenue growth management, cost containment and business simplification actions to counter the cost inflation. MDLZ remains encouraged about its growth strategy and its recently announced deal to acquire Ricolino, which is likely to strengthen the company’s footprint in Mexico.

Quarterly Performance

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.

Mondelez International, Inc. Price, Consensus and EPS Surprise

Mondelez International, Inc. Price, Consensus and EPS Surprise
Mondelez International, Inc. Price, Consensus and EPS Surprise

Mondelez International, Inc. price-consensus-eps-surprise-chart | Mondelez International, Inc. Quote

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.

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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.

Shares of this Zacks Rank #4 (Sell) company have declined 3.1% in the past three months against the industry’s growth of 6.1%.

Looking for Consumer Staple Stocks? Check These

Some better-ranked stocks are Sysco Corporation SYY, McCormick & Company MKC and Inter Parfums IPAR.

Sysco, which engages in the marketing and distribution of various food and related products, carries a Zacks Rank #2 (Buy) at present. Shares of Sysco have jumped 13.5% in the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Sysco’s current financial-year sales and EPS suggests growth of 30.4% and 120.1%, respectively, from the year-ago reported number. SYY has a trailing four-quarter earnings surprise of 3.7%, on average.

McCormick, the manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. Shares of McCormick have risen 2.7% in the past three months.

The Zacks Consensus Estimate for McCormick’s current financial-year sales and EPS suggests growth of nearly 5% and 3.9%, respectively, from the year-ago reported figure. MKC has a trailing four-quarter earnings surprise of around 1.3%, on average.

Inter Parfums, which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently carries a Zacks Rank #2. Shares of Inter Parfums have dropped 18% in the past three months.

The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 12.5% and 10.3%, respectively, from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 46.7%, on average.


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