Mondelez International (MDLZ) will report third quarter results this afternoon and management will host a call at 17:00.
Third quarter adjusted earnings are expected to grow 5% with revenue down 3% year-over-year. The company has exceeded earnings estimates six quarter in a row.
Revenue growth slowed to 2% last quarter due to divestitures and the foreign exchange headwind. However, organic revenue growth accelerated 90 basis points sequentially to 3.5%, which included the benefit of lapping the prior year's malware incident, the negative impact of Easter shipment timing and the Brazil trucking strike. Organic revenue growth slowed in Asia and Europe but turned positive in North America.
The company's geographic mix is fairly spread out. Year-to-date: ~39% of sales came from Europe, 26% from North America, 23% from Asia, Middle East & Africa and 13% from Latin America.
Adjusted Operating margins increased 130 basis points to 16.7% due to productivity savings and lower selling, general & administrative costs. As a result, adjusted EPS grew 17%.
Mondelez updated near-term and long-term guidance at its Investor Day on September 7.
The company reaffirmed its full-year 2018 outlook with Organic Net Revenue growth at the high end of the range of 1-2% growth. The company previously guided for double-digit adjusted EPS growth on a constant-currency basis. The company expects share repurchases to be ~$2 billion in 2018.
Analysts expect EPS to grow 26% this year with revenue up 0.6%.
Mondelez also provided an outlook for 2019. It expects Organic Net Revenue to increase 2-3%, Adjusted EPS to grow 3-5% on a constant currency basis, and Free Cash Flow to be ~$2.8 billion.
At the conference, Chief Executive Dirk Van de Put and other leaders discussed Mondelez International's plan to transition to a more growth-oriented company. The company's new strategy focuses on several key priorities:
- A more holistic view of consumer snacking behaviors to sharpen brand positioning in clear demand spaces;
- Transformation of marketing and digital capabilities to increase ROI;
- Balanced investments in both global and local heritage brands to achieve higher growth;
- The creation of a more agile organization with accelerated innovation capabilities;
- Brand extension into new markets and snacking adjacencies;
- Increased investments in channels such as eCommerce;
- Accelerating exposure in higher-growth geographies; and
- Leveraging partnerships and M&A to expand into new markets and snacking adjacencies
Long-term growth targets include:
- Organic Net Revenue growth of +3% plus;
- High-single digit Adjusted EPS growth at constant currency;
- Free Cash Flow of $3 billion plus; and
- Dividend growth outpacing Adjusted EPS growth.
Mondelez has underperformed the recent strength in the consumer staples sector, likely because of its international exposure.
The company has a $59 billion market value and trades at 16.7x EPS, which is a slight discount to the average consumer packaged goods company closer to 19x.