Mondelez’s Sales Show Little Signs of Cooling, Even as Inflation Continues To Put Profits on Ice

Our $66 fair value estimate for Mondelez should edge up by a low-single-digit percentage after the wide-moat packaged food operator closed the book on another solid quarter. This increase is generally in line with the response in after-market trading, rendering shares fairly valued. Its top-line mark was particularly impressive, as sales rose more than 15% on an organic basis in the fourth quarter on almost 14% higher prices and a nearly 2% contribution from higher volumes and favorable mix. We believe this performance is a byproduct of efforts to extend the distribution of its stout brand portfolio, its unrelenting commitment to funnel resources behind its brands—with advertising and consumer spending up high-single-digit percentages in the period, qualitatively referenced, and its decision to empower local leaders to ensure its fare aligns with evolving consumer trends. We don’t expect the firm to back down from these investments (in line with the nearly 7% of sales we forecast it to expend on research, development, and advertising annually over the next 10 years), which we think will help cement its position with retail partners and consumers, irrespective of the competitive landscape.