Morningstar

Mondelez's Mixed Quarter Overshadowed by CEO Departure

We view shares of the wide-moat firm as a touch undervalued today.

Securities In This Article
Mondelez International Inc Class A
(MDLZ)

Wide-moat

However, these results were overshadowed by the news that CEO Irene Rosenfeld is poised to step down in November and will be succeeded by Dirk Van de Put (currently CEO of McCain Foods, a privately held Canadian food firm). While we’re not surprised by Rosenfeld’s decision to retire after about a decade in the top spot, we had surmised Mondelez would likely poach an executive from within its ranks, with Tim Cofer (a 25-year company veteran who currently serves as chief growth officer and interim president, North America) as the most likely internal candidate. Despite this, we aren’t blind to Van de Put’s vast experience, including time spent at Coca-Cola, Danone, and Mars, which is a plus. At the outset, we don’t expect this leadership shift to drive a change in the firm’s prudent stewardship of shareholder capital or its strategic roadmap (centered on driving sustainable and profitable growth).

Rosenfeld has overseen sizable change at the organization, spanning the acquisitions of LU Biscuits and Cadbury and the spin-offs of the North American grocery business (now Kraft Heinz) and the international coffee operations. We think her decision to remain chairman through the end of the first calendar quarter of 2018 should ensure a smooth transition at the leading global snack food operator.

In the aggregate, we don’t foresee a change to our $50 fair value estimate or our long-term outlook for 4% annual sales growth and 350 basis points of operating margin expansion to 20% by fiscal 2026. Even after a low-single-digit uptick, shares still trade at a modest discount to our valuation, and in an industry where bargains are few and far beyond, we’d suggest investors keep this firm on their radar.

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About the Author

Erin Lash, CFA

Sector Director
More from Author

Erin Lash, CFA, is a sector director, AM Consumer, for Morningstar*. In addition to leading the sector team, she covers packaged food and household and personal care companies. Beyond managing a team of nine analysts and associates covering an array of consumer firms, Lash also conducts fundamental analysis of 13 multi-billion-dollar market capitalization firms in the packaged food and household and personal care space.

Before joining Morningstar in 2006, Lash spent four years as an investment analyst covering retail, transportation, and technology firms for State Farm Insurance. In this capacity, Lash analyzed financial statements, business strategy, and fundamentals of owned companies and potential investments, presenting her recommendations based on this analysis to State Farm portfolio managers for ownership consideration.

Lash holds a bachelor’s degree in finance from Bradley University’s Foster College of Business. She also holds a master’s degree in business administration, with concentrations in accounting and finance, from the University of Chicago Booth School of Business. Lash has completed the Chartered Financial Analyst® designation. She ranked second in the food and tobacco industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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