Sunday, March 21, 2021

An International Equity holding: Mondelez International, Inc. (MDLZ, $57.77): “Cookies, Candies, and Biscuits, Oh My!” by: Elise Olwig, AIM Student at Marquette University

 Mondelez International, Inc. (MDLZ, $57.77): Cookies, Candies, and Biscuits, Oh My!”

By: Elise Olwig, AIM Student at Marquette University


Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.




·      Mondelez International, Inc. (NASDAQ: MDLZ) is one of the world’s largest snack companies, primarily selling biscuits (cookies, crackers, and salted snacks), chocolate, gum & candy, grocery, and powdered beverage products. MDLZ’s extensive portfolio of brands includes Cadbury, Milka, Toblerone, Oreo, belVita, Halls, Trident, and Teng.

·      Net revenues were ~$26.6 billion in 2020, representing an increase of 2.8% from $25.9 billion in 2019, despite the significant impact of COVID-19 and the lockdowns that ensued. 

·      MDLZ reported robust Q4 results, with net revenues increasing 5.6% QoQ to $7,298 million, driven by increased sales from Give & Go Buyout and organic net revenue growth of 3.2%. 

·      On January 4, 2020, MDLZ completed the acquisition of Hu Master holdings, which will provide growth opportunities in the chocolate and cracker categories. 

·      Overall, MDLZ’s focus on cost-saving efforts, strategic brand-building efforts, accretive acquisitions, and organic revenue growth and earnings outlook for 2021 are notable attributes. 


Key Points


In 2020, Mondelez International saw an increased demand for their products, especially biscuits and chocolate, in developed markets such as North America, attributable to increased food purchases for in-home consumption. However, emerging markets posed some risk, as sales were adversely impacted by COVID-related restrictions and lockdowns, which affected travel retail and foodservice segments. 


Furthermore, diluted EPS in 2020 decreased 8.2% to $2.47, compared to a 20.6% increase to $2.69 in 2019. This EPS decline can be attributed to the prior-year Swiss tax reform benefit that inflated 2019 EPS in addition to unfavorable impacts of the pandemic such as intangible assets impairment charges, among other things. 


Despite the 2020 roadblocks, MDLZ reported robust Q4 results, with management anticipating a bright outlook. MDLZ’s e-commerce channel grew +75% in 2020, representing 5% of total sales compared to 3% in FY19. Net revenues increased 5.6% QoQ to $7,298 million, driven in part by increased sales from an acquisition in April 2020 of majority interest in Give & Go, which manufactures baked goods as well as other sweets and tarts. Notably, organic net revenue growth was 3.2%, which is in-line with management’s long-term guidance of 3%+ topline organic growth. The acquisition of Hu Master Holdings on January 4, 2021 will provide further growth opportunities in the chocolate and crackers categories throughout 2021, with increased access to e-commerce platforms and premium retail channels. MDLZ has a solid outlook of both organic and inorganic growth. 


MDLZ continues to focus on their key brand-building initiatives and savings & restructuring plans as well. The company is on-track with its restructuring program, referred to as the Simplify to Growth Program, aimed to reduce their operating cost structure (both supply chain and overhead), as adjusted operating margin increased 40 bps to 16.3% in Q4. Savings are being used to reinvest in their own brands, including product innovation and extension into new geographies and markets. MDLZ is continuing to strengthen its brand presence across digital media platforms and in high-growth channels such as e-commerce. 


What Has the Stock Done Lately? 


MDLZ hit its 1-month low on March 3, 2021 of $52.94 and has since rebounded in a consistent upward climb to $57.95. The stock is up ~28% YTD and ~1.5% in the past three months. Overall, the recovered stock price YoY from March of 2020 is indicative of the overall positive sentiment surrounding post-COVID recovery, as the vaccine rollout is finally improving. 


Past Year Performance


MDLZ’s stock price has grown 13.77% over the past year, experiencing a low of $41.92 and a high of $59.96. MDLZ hit its 52-week low on March 23, 2020 and rebounded to $53.44 in April. MDLZ’s stock price has been volatile due to uncertainty of COVID-recovery over the past year but finally appears to be on a general upward trend.  It is currently trading at $57.95, which is near the 52-week high. However, a strong post-COVID economic outlook will aid in growth. It is to be noted, however, that MDLZ is underperforming versus the benchmark this year. 


Source: FactSet


My Takeaway

Mondelez International was pitched in November 2019 with a price of $52.33 and an initial PT of $71.35. While the price target may be a little optimistic, Mondelez has delivered a solid ~14% return to the AIM International Fund. MDLZ outperformed the benchmark over the past three years, with 2021 as an exception, and I do not think short-term volatility and economic uncertainty induced by the pandemic should deter us from holding an investment that has untapped potential. MDLZ portfolio of historically sound brands in addition management’s clear cost-cutting and brand-enhancing initiatives deem Mondelez International a hold for the AIM International Fund. 

Source: FactSet