Why We're Sweet on Mondelez
The wide-moat firm's stable of strong brands, entrenched relationships with retailers, and expansive global scale should ensure it withstands looming headwinds.
Beyond this, Mondelez disclosed that the recent global cyberattack would constrain its second-quarter top-line performance to the tune of 300 basis points, while also resulting in one-time charges in both the second and third quarter of fiscal 2017 (but was light on specifics). Although this is far from a positive, management maintained its full-year guidance for around 1% organic sales growth and adjusted operating margins approaching 16% (which generally aligns with our forecast). And we don’t expect this near-term challenge to prompt a change to our long-term outlook--for 4% annual sales growth and 350 basis points of operating margin expansion to 20% by fiscal 2026.
Even in the face of intense competitive pressures and slowing global growth, we believe the firm’s stable of strong brands (with seven that each generate more than $1 billion in annual sales, including Oreo, Cadbury, LU, and Trident), entrenched relationships with retailers, and expansive global scale (more than 75% of revenue derived outside North America) should ensure it withstands looming headwinds. In this context, and given that shares are trading at nearly at a 15% discount to our $50 fair value estimate, we think long-term investors should sweeten to this wide-moat name.
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