We came across a bullish thesis on Mondelez International, Inc. (MDLZ) on Substack by Daan Rijnberk. In this article, we will summarize the bulls’ thesis on MDLZ. Mondelez International, Inc. (MDLZ)’s share was trading at $64.79 as of Nov 21st. MDLZ’s trailing and forward P/E were 22.98 and 18.90 respectively according to Yahoo Finance.
Mondelez International (MDLZ), a consumer staples giant, is emerging as a compelling value and defensive investment opportunity following a significant underperformance year-to-date, with shares down 10% amidst inflationary pressures. Despite losing another 13% since February while peers like Procter & Gamble, General Mills, and Hershey’s posted gains, Mondelez now trades at a meaningful discount to its historical multiples and competitors. This creates an attractive entry point for a long-term compounder in the snacks and convenience food sector.
Mondelez boasts a robust portfolio of iconic global and regional brands, such as Oreo, Milka, Ritz, and Chips Ahoy, making it a leader in high-growth categories like chocolate and biscuits. The company holds a 13% global chocolate market share, trailing only Mars, with the sector expected to grow at a 5.6% CAGR through 2030. It also dominates the global biscuits market with an 18% share, consistently gaining ground in an industry projected to expand at a 4.9% CAGR. These strong market positions, combined with management’s disciplined execution, underscore Mondelez’s resilience and growth potential.
The company’s Q3 results, reported on October 29, reaffirmed its strength. Despite facing ongoing cocoa price inflation—currently 233% above pre-inflation levels—Mondelez delivered 5.4% revenue growth, surpassing expectations. Price increases remained stable, and volume growth turned positive for the first time in a year, supported by loyal consumers adapting to price adjustments. Regions like North America and Europe saw 1% volume growth, reflecting resilience in developed markets, while emerging markets also rebounded, albeit under pressure from geopolitical factors and weak sentiment in China.
By product category, chocolate revenue grew 9.2% year-over-year, driven by strong performance in developed and emerging markets, despite lingering volume headwinds. Biscuits and baked snacks revenue grew 3.3%, supported by lower price hikes and notable brand loyalty, with U.S. mainstays Oreo and Ritz gaining market share year-to-date. These dynamics highlight Mondelez’s ability to leverage its brand equity even in challenging economic conditions.
Mondelez’s operational execution also shone through on the bottom line. Gross profit increased 11.2%, with a gross margin of 40.5%, up 230 basis points year-over-year, while operating margins reached 18.9%, the highest in years. Adjusted EPS surged 28.6% to $0.99, outpacing consensus by 16.5%. Free cash flow remained strong at $2.5 billion year-to-date, even after absorbing a $400 million EU fine. This supported robust shareholder returns, including $1.2 billion in buybacks and $1.7 billion in dividends, with the current yield at nearly 3%, well above its historical average.
Looking forward, Mondelez’s streamlined focus on chocolate and biscuits, combined with geographical diversification and its premium brand portfolio, positions it for sustained growth. While 2024 guidance aligns with its long-term targets of 3-5% revenue growth and high-single-digit EPS gains, the potential easing of cocoa prices in 2025 could further enhance profitability. With a dividend growing at a 10% CAGR and a sub-50% payout ratio, Mondelez remains a top defensive play, offering both stability and growth for patient investors.
Mondelez International, Inc. (MDLZ) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held MDLZ at the end of the third quarter which was 47 in the previous quarter. While we acknowledge the risk and potential of MDLZ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MDLZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.