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Mondelez's (MDLZ) Stock Up on Q4 Earnings & Revenue Beat

Zacks Equity Research

Mondelez International, Inc. MDLZ reported fourth-quarter 2019 results, wherein both earnings and sales surpassed the Zacks Consensus Estimate for the second and fifth successive time, respectively. Also, sales increased year over year on favorable pricing and volumes, though adverse currency movements were a hurdle. These factors along with management’s guidance for 2020 seem to have lifted investors’ confidence.

Evidently, shares of the company gained 2.6% in yesterday’s after-hours trading session. Further, this Zacks Rank #3 (Hold) stock has gained 17.9% in a year, outpacing the industry’s growth of 9.8%.

Q4 Performance

Adjusted earnings of 61 cents per share surpassed the Zacks Consensus Estimate by a penny. On a constant-currency (cc) basis, adjusted earnings remained flat year over year. Improved sales seem to have been offset by lower adjusted margins.

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 2.1% year over year to $6,913 million and surpassed the Zacks Consensus Estimate of $6,836 million. The upside was backed by organic net revenues, which grew 4.1% on favorable pricing and volume/mix in emerging and developed markets. However, currency headwinds were a deterrent.

Revenues from emerging markets rose 4% to $2,538 million, while the same increased 8.2% on an organic basis. Revenues from developed markets inched up 1% to $4,375 million, while the same grew 1.8% on an organic basis.

Regional-wise, revenues in Latin America dropped 2.4% year over year but climbed 2%, 1.6% and 4.6% in Asia, the Middle East & Africa; Europe; and North America, respectively. Nonetheless, on an organic basis, revenues increased 7.6%, 4.9%, 3.3% and 3.1% in Latin America; Asia, the Middle East & Africa; Europe; and North America, respectively.

Adjusted gross profit increased $119 million (on a cc basis). However, adjusted gross margin contracted 10 basis points, owing to plant transition hurdles in Brazil, increased inflation in Argentina and weakness in powdered beverages.

The company’s adjusted operating income rose $52 million (at cc) from the prior-year quarter. However, adjusted operating margin fell 30 bps to 15.9% due to lower adjusted gross margin and elevated overhead expenses.

Other Financials

Mondelez ended the quarter with cash and cash equivalents of $1,291 million, long-term debt of $14,207 million and total equity of $27,351 million.

During 2019, the company generated cash from operating activities of roughly $4 billion. Free cash flow was $3 billion during the year. The company expects 2020 free cash flow of approximately $3 billion.

During the quarter, the company distributed around $750 million to shareholders through share repurchases and cash dividends. In 2019, Mondelez returned nearly $3 billion to shareholders.

Guidance

Mondelez is pleased with its 2019 performance. The company is on track with growth strategies, which include expansion across core markets and channels; investments in local and global brands; enhancing the supply chain; and undertaking marketing and sales initiatives.

For 2020, the company expects organic net revenue growth of more than 3%. Management anticipates currency fluctuations to negatively impact net revenues by nearly 1%.

Currency-neutral adjusted earnings per share are likely to grow in high-single digits.

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