Why We're Sweet on Mondelez

The wide-moat firm's stable of strong brands, entrenched relationships with retailers, and expansive global scale should ensure it withstands looming headwinds.

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

Beyond this, Mondelez disclosed that the recent global cyberattack would constrain its second-quarter top-line performance to the tune of 300 basis points, while also resulting in one-time charges in both the second and third quarter of fiscal 2017 (but was light on specifics). Although this is far from a positive, management maintained its full-year guidance for around 1% organic sales growth and adjusted operating margins approaching 16% (which generally aligns with our forecast). And we don’t expect this near-term challenge to prompt a change to our long-term outlook--for 4% annual sales growth and 350 basis points of operating margin expansion to 20% by fiscal 2026.

Even in the face of intense competitive pressures and slowing global growth, we believe the firm’s stable of strong brands (with seven that each generate more than $1 billion in annual sales, including Oreo, Cadbury, LU, and Trident), entrenched relationships with retailers, and expansive global scale (more than 75% of revenue derived outside North America) should ensure it withstands looming headwinds. In this context, and given that shares are trading at nearly at a 15% discount to our $50 fair value estimate, we think long-term investors should sweeten to this wide-moat name.

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About the Author

Erin Lash, CFA

Sector Director
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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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