Decent but Inflated Sales, Profit Gains for Mondelez

While margin gains have taken center stage over the past several quarters, the highlight from

Further, higher raw material and transportation costs ate into margins (particularly on its home turf), but these pressures were offset by its efforts to drive efficiencies across the organization, as adjusted gross margins contracted 110 basis points to 39.4% but adjusted operating margins ticked up 20 basis points to 16.7%. We aren’t blind to the competitive and inflationary headwinds plaguing firms across the consumer products landscape, though, we posit Mondelez will weather these challenges with its portfolio of leading brands, entrenched retail relationships, and expansive global scale (which underlie our wide moat).

Results aligned with our expectations, and management held the line on its full-year outlook (low-single-digit organic sales growth and adjusted operating margins around 17%). As such, we don’t intend to alter our $51 fair value estimate or long-term forecast (4% annual sales growth and 20% operating margins, an increase of 400 basis points by fiscal 2027). Shares trade at more than a 20% discount to our valuation, and we think investors looking to feast on the packaged food landscape should stock up.

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