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Below is a brief excerpt from a complementary research note written by our Consumer Staples analysts Howard Penney and Daniel Biolsi. We are pleased to announce our new Sector Pro Product Consumables Pro. Click HERE to learn more. |
Mondelez reported Q3 EPS of $.63, a penny above consensus expectations. Organic net revenue grew 4.4%, ahead of consensus expectations of 2.6%. North American organic growth of 6.3% led the other regions but decelerated from 11% in Q2.
Europe grew 3.4%, rebounding from the 1.2% decline in Q2 despite weakness in travel retail a 2% headwind. Developed Markets growth of 3.8% (decelerating from 4.1%) lagged the 5.3% growth in Emerging Markets (accelerating from -5.1%).
In Emerging Markets, 80% of the division’s revenue base had strong growth trends. In AMEA, organic net revenue growth rebounded to +4.2% from -3.1% in Q2 while operating income grew 16.8%. Latin America grew 3.1%, rebounding from -11.3% in Q2. Retailers restocking during the quarter added 1% to the topline.
Total snacks were up 3.1%, with biscuits up 7.8% and chocolate up 5.3%, while gum and candy were down 18.6%. Adjusted gross margins expanded 20bps driven by leverage, pricing, and productivity offset by higher raw material and COVID-19 costs.
Management is guiding EPS for the year to be up 5%, in line with consensus expectations. The guidance on an absolute basis is impressive, given the global pandemic.
Mondelez has proven the value of its global portfolio, with some businesses benefiting from some trend changes in snacking while other businesses were negatively impacted by consumers staying at home.
The biggest concern has been the company’s emerging markets business, which has now shown rebounding growth. The shares will likely outperform when investors want more emerging market exposure. Our outlook is constructive here, and the company is on our Long Bias list.
