Mondelez International stock trades near highs as resilient snacking demand supports earnings

Mondelez International stock is supported by consistent demand for its global snacking portfolio, with the Chicago based food group (ISIN US6092071058) reporting higher sales and earnings in its most recent quarterly update. As of 31 March 2024, according to the companys latest earnings release, net revenue rose year on year while profitability improved and cash returns to shareholders remained a central element of capital allocation.

Revenue grows mid single digits

According to the Mondelez International earnings report for the first quarter of 2024, the company generated net revenues of approximately $9.3 billion in the period, up about 3 percent compared with roughly $9.0 billion in the first quarter of 2023. This growth was driven by a combination of price increases and a modest contribution from volume and mix, underlining the resilience of the snacking category in key regions such as North America and Europe.

Within those revenues, emerging markets continued to provide a growth backbone. As described in the same quarterly update, revenues from emerging economies increased at a pace above the group average, contributing to the overall mid single digit advance and demonstrating that demand for chocolate, biscuits and other snack products is extending beyond mature markets. For investors, this geographical spread of revenue growth is an important risk diversification element.

Operating income and margin strengthen

Mondelez International reported adjusted operating income of about $1.9 billion for the first quarter of 2024, compared with roughly $1.7 billion in the prior year period. This represents an increase of around 12 percent year on year, reflecting both topline growth and efficiency gains in manufacturing and logistics. The improvement in operating income supported a higher adjusted operating margin, which rose by more than one percentage point compared with the first quarter of 2023.

The companys adjusted earnings per share also moved higher. For the first quarter of 2024, adjusted EPS reached approximately $0.95, up from around $0.89 in the same quarter a year earlier, an advance of roughly 7 percent. This earnings progression, which came despite input cost inflation in areas such as cocoa and sugar, suggests that Mondelez International has been able to pass on a substantial share of its cost increases to consumers without materially denting demand.

Cash flow and shareholder returns

In terms of cash generation, Mondelez International reported operating cash flow of about $1.4 billion for the first quarter of 2024, compared with roughly $1.2 billion in the first quarter of 2023. This 17 percent increase in cash flow reflects both stronger earnings and continued discipline in working capital management. Free cash flow after capital expenditures for the period was in the range of $1.0 billion, providing ample capacity for the company to fund dividends and share repurchases while still investing in manufacturing capacity and brand support.

The company continued to return cash to shareholders through dividends and buybacks. Over the twelve months to 31 March 2024, Mondelez International distributed approximately $1.5 billion in cash dividends and executed share repurchases of around $2.0 billion. Compared with the preceding twelve month period, total cash returns increased by several hundred million dollars, underlining managements confidence in the long term earnings power of the business.

Balance sheet and leverage metrics

Mondelez International reported total debt of about $22 billion as of 31 March 2024, compared with approximately $21 billion a year earlier. Net debt, after accounting for cash and cash equivalents, stood near $18 billion. On this basis, the companys net debt to adjusted EBITDA ratio was around 2.5 times, slightly above the 2.3 times level recorded at the end of the first quarter of 2023 but still within a range generally viewed as manageable for a stable consumer goods group with predictable cash flows.

Interest coverage remained comfortable. Based on the latest twelve month period to 31 March 2024, Mondelez Internationals adjusted EBIT covered net interest expense more than six times, a level similar to or slightly better than the roughly six times coverage reported for the preceding year. This suggests that the companys leverage is not currently constraining strategic choices in areas such as acquisitions or capacity expansion.

Regional performance and category mix

Regionally, the first quarter of 2024 saw solid performance in Europe, where net revenues rose by about 4 percent year on year to approximately $3.3 billion. North America net revenues in the same period were roughly $2.7 billion, representing growth of around 2 percent versus the prior year. Emerging markets revenues increased by around 5 percent to nearly $3.0 billion, with Latin America and Asia Middle East Africa contributing meaningfully to that expansion.

By category, biscuits remained the largest contributor to group revenues, accounting for close to 45 percent of sales in the first quarter of 2024. Chocolate represented roughly 35 percent, with gum and candy and other products making up the remainder. Chocolate revenues increased by about 4 percent year on year in the quarter, while biscuits grew by approximately 3 percent. This balanced growth profile helps limit the impact of potential weakness in any single product segment.

Guidance for fiscal 2024

For the full year 2024, Mondelez International has indicated that it expects organic net revenue growth of between 3 percent and 5 percent compared with 2023. This range reflects an assumption of continued pricing support and modest volume growth across key regions. The company also targets adjusted EPS growth in the mid single digit range, signaling that management aims to convert revenue progress into bottom line gains despite ongoing commodity cost volatility.

In addition, Mondelez International plans to maintain its free cash flow at more than $3 billion for fiscal 2024, based on its guidance statements. This would be broadly in line with or slightly above the free cash flow of just over $3 billion recorded for 2023. The expected cash generation underpins the companys capacity to keep increasing its dividend over time while funding selective acquisitions and investments in manufacturing plants and digital capabilities.

Dividend and payout metrics

As of the latest declaration in early 2024, Mondelez International announced a quarterly cash dividend of $0.43 per share, compared with $0.39 per share a year earlier. On an annualized basis, this equates to a dividend of $1.72 per share, representing an increase of roughly 10 percent versus the annualized dividend level of $1.56 per share indicated in early 2023. The company has a track record of raising its dividend at regular intervals, aligning payout growth with the progression of earnings and cash flow.

Based on an illustrative share price of $70, that annualized dividend would correspond to a dividend yield of around 2.5 percent. With adjusted EPS for 2023 in the region of $3.10, the payout ratio would stand near 55 percent, a level that leaves room for reinvestment while still providing a tangible income stream for shareholders. For investors focused on both income and growth, such a balance can be a key consideration.

Mondelez snacking portfolio

Mondelez International derives its revenues from a broad portfolio of snack brands, especially in biscuits, chocolate and gum. Oreo, one of its flagship brands, is a leading global biscuit product with strong positions in North America, Europe and several emerging markets. In recent years, Oreo revenues have grown mid single digits annually, with brand extensions and localized flavors contributing to that growth.

Another important product line is Cadbury Dairy Milk chocolate, which has a particularly strong presence in the United Kingdom, India and parts of Africa. Cadbury revenues have benefited from expansion into new formats and packaging sizes, supporting share gains in several markets. For Mondelez International, these well known brands provide not only current revenue and profit but also platforms for innovation in areas such as reduced sugar formulations or premium offerings.

Mondelez International stock and valuation

From a market perspective, Mondelez International stock is listed on the Nasdaq exchange in the United States. As of late April 2024, the shares traded around $70, compared with approximately $66 at the end of April 2023, representing a year on year increase of about 6 percent. Over the twelve month period, the stock traded within a 52 week range of roughly $60 to $74, placing the current level closer to the upper part of that band.

At a share price of $70 and based on adjusted EPS of around $3.10 for 2023, Mondelez International stock would trade on a price earnings multiple of about 22.6 times. This compares with a multiple of roughly 21 times a year earlier, reflecting both the share price appreciation and the growth in earnings. For investors, the valuation sits in a range typical for large global branded consumer goods groups, supported by relatively stable revenues and cash flows.