After Mondelez had a few years of sluggish growth and a stagnant stock price, new CEO Dirk Van de Put came in last year with an offensive strategy to improve the company's operating performance. The result has been a small acceleration in organic net revenue (which excludes the impact of acquisitions, divestitures, and currency) over the last year, which has given investors a renewed confidence that the global snack food giant can deliver satisfactory returns.
Since Van de Put took the reins of the Oreos maker, the company has been fine-tuning its marketing message, investing in digital capabilities to increase profitability, accelerating innovation, and expanding into new markets. Management believes these efforts will fuel long-term growth in organic net revenue of at least 3% annually, while investments in higher-margin areas should drive a high-single-digit increase in adjusted earnings per share (EPS).
So far, Mondelez is meeting, if not exceeding, those expectations. In the first quarter, organic net revenue growth accelerated to 3.7% year over year -- better than the 2.4% reported for the fourth quarter of 2018. The top line was helped by improved results out of North America; it has struggled in recent years amid consumer trends away from salty snacks. Growth on the bottom line was also strong, with adjusted earnings up 13% year over year.
Speaking on the solid start to 2019, Van de Put said, "Our progress reinforces our confidence that the investments we are making behind our global and local brands, our sales capabilities, and our innovation will deliver sustainable long-term growth and create value for our shareholders."
Despite the better-than-expected performance in the first quarter, management chose to stick with previous full-year guidance for organic revenue of 2% to 3%, while adjusted earnings should be 3% to 5% more than last year.
Management expects bottom-line growth to remain modest this year because of investments in brands, sales, and innovation to drive growth over the long term. Also, the double-digit growth in adjusted EPS in the first quarter was partly the result of lower taxes and interest expense, which management doesn't expect to contribute for the rest of the year.
Nonetheless, it's encouraging to see Mondelez's North American business gradually regaining its footing. Speaking on the performance in North America, CFO Luca Zaramella said, "We continue to expect progress in 2019, albeit not linear, with overall modest growth for the year."
Apparently, that's all investors needed to hear to keep the stock moving higher in the first half of 2019.