Food and beverage conglomerate Mondelez International Inc. (NASDAQ:MDLZ) may be poised for strong earnings per share and revenue growth at a time when many peers are struggling, thanks to its potential for expanded distribution in emerging markets, favorable brand positioning, and savvy mergers and acquisitions approach.
Wall Street analysts are optimistic about MDLZ stock, and I share their optimism, particularly over the medium-to-long term, as its growth strategies have time to unfold. Below, we’ll examine some factors to consider before entering a position in MDLZ at this point.
Emerging Markets Growth Potential
Mondelez has seen its business boom in Latin America following its 2022 purchase of Ricolino, the confectionery business of Mexico’s Group Bimbo, for $1.3 billion. For the final quarter of 2023, Latin American revenues climbed by 24.5% year-over-year to $1.26 billion, making this the company’s fastest-growing region. For all of 2023, Latin American revenue surged by a whopping 37.9%, far outpacing the growth rate of any other geographic region.
The rapid growth in Latin America is no coincidence. Mondelez has undertaken a dedicated effort to focus on growth areas like this one. Indeed, for the full-year 2023, Emerging Markets revenue climbed by 7.8% to $3.6 billion, including a 14.9% increase on an organic basis. Gains in Brazil, Mexico, China, and India all helped to fuel this growth, which surpassed the 6.6% increase in Developed Markets sales over the same period.
All of this has contributed to growing revenue and earnings per share forecasts for 2024. Mondelez management expects 2024 organic net revenue growth toward the high end of the 3-5% range, as well as high-single-digit adjusted EPS growth for the year. TD Cowen analyst Robert Moscow suggests that, based on Mondelez’s history of accurate forecasting, its 2024 guidance may be on the conservative side.
Mondelez Has Favorable Brand and Product Positioning
This growth is fueled in large part by the company’s core snack brands, including Cadbury, Clif, Oreo, Wheat Thins, and more. In its recent study of snacking habits, Mondelez found that six out of 10 consumers prefer to snack in smaller portions throughout the day rather than eat full meals.
Two of Mondelez’s core categories, in particular, seem well-positioned for growth and resilience to economic turmoil. The company’s biscuits and chocolates businesses have traditionally appealed to consumers in both emerging and developed markets and are seen as affordable, highly-valued snacking categories regardless of broader economic conditions.
Mondelez’s Biscuits business grew by 11.9% last year, and Chocolates grew by 14.5%. The company remains focused on building up both of these categories, each of which represents an opportunity for profitability and growth. The company also continuously reinvests in distribution, marketing, and digital tools for distribution efficiency.
MDLZ’s Savvy Mergers and Acquisitions
The food and beverage business is a highly competitive space, and Mondelez has displayed ingenuity and careful long-term planning when approaching its decisions to acquire or sell brands and subsidiaries.
The above-mentioned Ricolino purchase in late 2022 was the company’s most recent major acquisition. But it has also acquired several other brands in the last couple of years, each with an eye toward expanding its operations in particular regions or product categories. In 2022, Mondelez closed on its purchase of energy bar maker Clif and European snack maker Chipita S.A.
At the same time, Mondelez has found opportunities to divest from certain business lines that may not be in keeping with its core growth strategy. For example, it sold its gum business late in 2022.
Is MDLZ Stock a Buy, According to Analysts?
Shares of MDLZ have dropped by about 1% in the last year. Now, analysts overwhelmingly rate the stock optimistically, with 18 Buy ratings, one Hold, and zero Sells across Wall Street, giving it a Strong Buy consensus rating. The average MDLZ stock price target of $83.17 implies 24.7% upside potential.
The Takeaway: Core Category Growth and Expansion Potential
Mondelez offers an attractive proposition based on its beloved brands, its concerted and successful efforts to expand its business in emerging markets, and its thoughtful, strategic acquisitions and divestments. The company is poised to take advantage of an increasing interest in snacking over regular meals and could provide investors with big gains in the process.
