On Wednesday, BofA Securities revised its price target for Mondelez (NASDAQ:MDLZ) International (NASDAQ:MDLZ), a leading global snack company, reducing it to $82.00 from the previous target of $84.00. Despite the price target adjustment, the firm has kept a Buy rating on the stock.
The adjustment follows a detailed analysis of various economic factors impacting Mondelez's operations. BofA Securities cited a more significant than expected depreciation in Latin American currencies, specifically the Mexican Peso and Brazilian Real, adjusting the forecasted currency impact to -11% from -9%.
Additionally, the firm moderated its expectations for North America volumes, now anticipating a +2.5% increase compared to the previously estimated +5%. This change accounts for the slower impact of pack size changes on the company's results and comes despite an easy year-over-year comparison for the fourth quarter.
Further adjustments were made to Mondelez's gross margin (GM) estimates, which are now set at 32.5%, down from the previous estimate of 34.8%. This represents a year-over-year decrease of 540 basis points. Selling, General & Administrative (SG&A) expenses are also expected to rise only modestly year-over-year.
BofA Securities also revised its projection for Mondelez's interest expense, lowering it to $75 million from $110 million to align with recent quarterly trends. The tax rate estimate was reduced to 20% from the previous 22.5%, bringing the full-year tax rate closer to 25%.
The combined impact of these revisions is expected to result in a $0.13 per share decrease in Mondelez's fourth-quarter earnings per share (EPS) above the operating line. However, improvements below the line, including the reduced interest expense and tax rate, are projected to provide a $0.04 per share benefit.
In other recent news, Mondelez International reported a robust third quarter in 2024, with a 5.4% increase in organic net revenue and a significant 28.6% rise in adjusted earnings per share. The company's developed markets experienced a 5.6% growth, while emerging markets showed a 4.9% increase.
Despite challenges like brand boycotts in some markets and rising cocoa costs, Mondelez remains positive about its long-term growth, particularly in the chocolate segment.
The company has also recently acquired a majority stake in Evirth, a leader in Chinese cakes and pastries, aiming to strengthen its global market position. The acquisition is part of Mondelez's strategic plan for 2025, which includes achieving cost efficiencies and continuing investments in brand development.
The company's outlook for 2024 remains unchanged, expecting sustainable growth despite short-term obstacles. Furthermore, Mondelez plans to focus on core categories, predicting that 90% of its revenue will come from chocolate, biscuits, and baked snacks by 2030.
InvestingPro Insights
To complement BofA Securities' analysis, recent data from InvestingPro offers additional context on Mondelez International's financial position. The company's market capitalization stands at $92.33 billion, reflecting its significant presence in the global snack industry. Mondelez's P/E ratio of 24.25 suggests investors are willing to pay a premium for its earnings, possibly due to its strong market position and growth prospects.
InvestingPro Tips highlight Mondelez's commitment to shareholder returns, noting that the company has raised its dividend for 10 consecutive years. This is underscored by the current dividend yield of 2.72% and an impressive dividend growth rate of 10.59% over the last twelve months. These figures align with BofA's continued Buy rating, indicating the company's financial stability and potential for long-term value creation.
The revenue growth of 2.13% over the last twelve months, while modest, supports BofA's adjusted volume expectations for North America. Additionally, Mondelez's gross profit margin of 38.77% provides context for BofA's revised gross margin estimates, suggesting the company maintains relatively strong pricing power despite economic headwinds.
For investors seeking a deeper understanding of Mondelez's financial health and growth potential, InvestingPro offers 14 additional tips, providing a comprehensive view of the company's prospects in the dynamic snack food market.
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