Mondelēz’s Recent Results See Earnings Grow Faster than Sales

Mondelēz: Growth Drivers Powering the Snack Food Giant

(Continued from Prior Part)

Mondelēz’s earnings analysis in 2015 YTD

Mondelēz’s (MDLZ) results for 2Q15, which ended June 30, were ahead of Wall Street estimates on both sales and adjusted EPS (earnings per share). However, the reported results were heavily affected by currency headwinds. The reported sales fell by 9.20% to $7.7 billion, but grew 4.30% on an organic basis. Mondelēz derives almost 80% of its sales from outside North America.

Flat growth

In contrast, the sales growth for its US peers General Mills (GIS) and Hershey (HSY) was almost flat in their last respective quarters. Both General Mills and Hershey derive a significantly lower percentage of their sales from outside the US—compared to Mondelēz. General Mills derived less than one-third of its turnover from international operations in fiscal 2015. International sales fell by 9% to $1.2 billion in 4Q15. The results for Hershey were affected by weak performance in China.

Mondelēz, General Mills, and Hershey account for ~6.90% of the portfolio holdings in the Consumer Staples Select Sector SPDR Fund (XLP).

Organic sales performance

Mondelēz’s 2Q15 performance was strong in Emerging Markets. Organic sales rose 9.70%. Organic sales only rose by 0.90% in Developed Markets.

In 1H15, organic sales grew 10.20% in Emerging Markets and 0.20% in Developed Markets. Europe’s Nestlé (NSRGY) and Danone (DANOY), reported organic sales growth of 4.50% and 4.60%, respectively, in 1H15.

All of Mondelēz’s geographic segments, with the exception of North America, reported falling volumes. This was mainly due to higher prices, particularly in Emerging Markets, as the company strove to mitigate the impact of falling local currencies versus the US dollar.

EPS

The adjusted EPS rose 37.50% to $0.47. For full-year 2015 and over the next few years, Mondelēz expects to generate double-digit growth in EPS on a constant-currency basis. Mondelēz has been employing zero-based budgeting and implementing other cost-saving measures over the past few quarters.

On September 10, Mondelēz announced several initiatives to spur revenue growth and cut costs along with other supply chain improvements. In this series, we’ll discuss these measures and the projected impact.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Investors’ Interest in Mondelēz: Is It a Sweet Deal?

• Part 3 - How Packaged Food Firms Stack in the Profitability Stakes

• Part 4 - Mondelēz’s Looks for Cost Savings through Plant Modernization