Please ensure Javascript is enabled for purposes of website accessibility

Mondelez International Earnings Preview: What to Watch

By John Ballard - Oct 26, 2017 at 6:02AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Mondelez's sales performance has been weak recently. Will the third quarter be the beginning of tastier quarters to come?

Mondelez International (MDLZ -1.00%) is set to report its third-quarter earnings on Monday, Oct. 30, after the market close. It's crunch time for the maker of products including Trident gum and Triscuit crackers. The stock is down 7% year to date, following a trend of weak sales performance.

Here's what investors need to know.

Headline numbers

Mondelez doesn't provide guidance on a quarterly basis, so we'll have to rely on Wall Street analysts' estimates for third-quarter sales and earnings expectations. Analysts are predicting revenue to grow 0.90% year over year to $6.46 billion, with earnings per share growing 7.8% year over year to $0.55.

Keep in mind, however, that we Fools don't want to play the short-term expectations game that Wall Street plays as we are more interested in how businesses do over the long term. However, stock prices do respond in the short term to whether a company exceeds or misses analysts' expectations.

Plate of chocolate cookies with cream filling


We do know that total organic sales growth -- which adjusts for the impact of acquisitions, currency fluctuation, and other items -- declined 1% in the first half of the year. Despite weakness on the top line, management has focused on reducing unnecessary costs and divesting underperforming or non-core businesses to improve margins. This focus has provided a big boost to earnings, with adjusted earnings per share in the first half of 2017 growing 13% year over year. Management expects to finish 2017 with a mid-16% adjusted operating margin and double-digit earnings growth.

Recently, the snack maker divested its French confectionary and Australian cheese businesses. Management plans to use the cash from these divestitures to increase share repurchases to between $1.5 billion and $2 billion, or about 2.7% of Mondelez's current market capitalization, as well as increase the quarterly dividend by 16% to $0.22 per share.

North American sales growth

Looking deeper, investors will be paying particular attention to North American organic sales growth. The maker of Oreos and Ritz crackers has struggled to find growth in North America as consumers in developed markets are buying fewer of the types of snacks it sells. Organic sales in North America declined 5% year over year in the first half of 2017. Sales growth worsened in the second quarter, falling 2.7%, after a malware incident wreaked havoc on the company's ability to invoice customers for orders.

However, management expects a stronger second half and held to previous guidance for 1% growth in companywide organic sales growth for the full year. To achieve this goal, the snack giant has several new products coming out to improve North American growth, such as new Vea brand snacks, non-GMO Triscuits, Belvita Protein, Ritz Crisp & Thins, and Good Thins.

Mondelez management is also optimistic about the short term following a competitor's exit from its direct-store-distribution system. That exit is allowing Mondelez, which has an important competitive advantage based on its own vast distribution network, to swoop in and fill empty shelf space.

Emerging-market sales growth

Investors will also want to see that international regions continue to grow stronger to offset lower growth in North America. All international regions have posted positive organic sales growth year to date. This is important, as emerging-market sales make up 40% of Mondelez's total annual revenue. Latin America had the strongest growth of all regions in the first half of the year, growing organic sales 1.6% year over year.

Foolish final thoughts

Despite the malware incident in the second quarter, the first half played out within management's expectations. The most important thing investors will want to know is that Mondelez's North American business is on the right track to get back to growth. On that front, investors should pay particular attention to what management has to say about the performance of new products and its progress on expanding shelf space.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Mondelez International, Inc. Stock Quote
Mondelez International, Inc.
$62.01 (-1.00%) $0.62

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.