Saturday, December 7, 2013

Despite Mixed Results, Mondelez Is Still Poised For Long-Term Growth

By Sarfaraz A. Khan and Gohar Yousuf

Activist investor Nelson Peltz has been pressuring the confectionery, food and beverage giant Mondelez International (MDLZ) to cut down on costs. He believes that the company can double its earnings by 2015 if it is managed properly. And he could be right, given the company owns several powerful brands, such as Cadbury, Oreo, Tang and Trident, and has a strong presence in the emerging markets. Peltz is also known for criticizing the company’s name, which, he thinks, “sounds like a disease.” Earlier in July, Peltz came forward with an interesting proposal which involved the merger of the food and beverage behemoth PepsiCo (PEP) with Mondelez’s snack business to make a $70 billion snack food giant. As of March 2013, Peltz owns a $1.23 billion stake in Mondelez and a $952 million stake in PepsiCo.

Mondelez has recently released its quarterly results in which it managed to beat the earnings estimates but failed to impress on the revenues front. The business reported strong performance in the emerging markets, with the exception of China. However, Mondelez continues to target considerable growth in revenues, earnings and margins, over the long term. 

Top and Bottom Line

In its results for the third quarter ending September, Mondelez’s net earnings rose 57.1% to $1.02 billion, from $652 million in the same quarter last year. Strong organic sales in most of the markets are the reason behind the better than expected performance. However, the increase in commodity costs had an adverse impact on profitability, as gross .... read full article at GuruFocus