Mondelez (MDLZ) Q2 Earnings Beat Estimates, Organic Sales Rise
Mondelez International, Inc. MDLZ reported splendid second-quarter 2022 numbers, as the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. The company delivered strong second-quarter and first-half results, which were highlighted by sturdy top and bottom-line shows across all categories and regions, leading to the raised revenue growth guidance for the full year.
Mondelez’s chocolate and biscuit businesses continue to reflect solid volume gains and pricing power in developed and emerging markets. This, together with the ongoing cost control, revenue growth management and simplification, is resulting in strong profits and cash flows. This also encouraged management to raise its dividend by 10%.
MDLZ remains focused on its core strategy alongside reshaping its portfolio. The company recently announced the deal to acquire Clif Bar, which boasts a robust snack bar business worth more than 1 billion.
Quarterly Performance
Adjusted earnings came in at 67 cents per share, which increased by 9.1% year over year on a constant-currency or cc basis. The metric surpassed the Zacks Consensus Estimate of 64 cents per share. The year-over-year upside was backed by reduced outstanding shares, decreased taxes and solid operating gains. This was partly countered by the elevated interest expense and the reduced income from equity method investments.
Mondelez International, Inc. Price, Consensus and EPS Surprise
Mondelez International, Inc. price-consensus-eps-surprise-chart | Mondelez International, Inc. Quote
Net revenues advanced 9.5% to $7,274 million, which beat the Zacks Consensus Estimate of $6,777 million. The uptick was driven by the strong organic net revenue growth of 13.1% and increased sales from the Chipita buyout, somewhat negated by currency headwinds. Favorable volumes and pricing contributed to organic net revenues.
Revenues from emerging markets increased by 22.4% to $2,806 million while rising 22.5% on an organic basis. Revenues from developed markets moved up 2.7% to $4,468 million while increasing 8.1% on an organic basis.
Region-wise, revenues in Latin America, Asia, the Middle East & Africa, Europe and North America increased by 30.9%, 5.7%, 6.1% and 9.3% year over year, respectively. On an organic basis, revenues increased by 33%, 13.2%, 10.8% and 9.2% in these regions, respectively.
The adjusted gross profit ascended to $257 million at cc. The adjusted gross profit margin contracted by 210 basis points (bps) to 37.9% due to increased raw material and transportation costs and an adverse mix. These were somewhat negated by favorable pricing and volume leverage.
Mondelez’s adjusted operating income rose $91 million at cc. The adjusted operating income margin contracted by 110 bps to 15.1% 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 $1,924 million, long-term debt of $17,861 million and total equity of $27,553 million. MDLZ generated net cash from operating activities of $1,967 million during the six months ended Jun 30, 2022. Free cash flow was $1.6 billion during the same period. Management expects 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. Concurrent to the earnings release, management announced a 10% hike in its quarterly cash dividend, taking it to 38.5 cents per share on its Class A stock. This is payable on Oct 14, 2022 to shareholders of record as of Sep 30.
Guidance
Management revised its guidance for 2022, which reflects anticipation of continued top-line growth, the 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 8% compared with the more than 4% growth expected earlier. The updated view reflects sturdy first-half performance, together with strong pricing associated with higher input costs.
Management continues to envision mid-to-high single-digit growth in adjusted earnings per share or EPS at cc. Currency movements are likely to negatively impact net revenues by nearly 5% and adjusted EPS by 22 cents in 2022.
Shares of this Zacks Rank #4 (Sell) company have declined 4.9% in the past three months compared with the industry’s decline of 5.9%.
Solid Consumer Staple Stocks
Some better-ranked stocks are The Chef's Warehouse CHEF, Sysco Corporation SYY and Campbell Soup CPB.
The Chef's Warehouse, which engages in the distribution of specialty food products, sports a Zacks Rank #1 (Strong Buy). The Chef's Warehouse has a trailing four-quarter earnings surprise of 372.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year EPS suggests significant growth from the year-ago reported number.
Sysco, which engages in the marketing and distribution of various food and related products, sports a Zacks Rank #1. Sysco has a trailing four-quarter earnings surprise of 9.1%, on average.
The Zacks Consensus Estimate for SYY’s current financial-year sales suggests growth of 13.2% from the year-ago reported number.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank #2 (Buy). Campbell Soup has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for CPB’s current financial-year sales suggests growth of 0.5% from the year-ago reported figure.
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