Mondelez International Inc. (MDLZ), a spin-off of Kraft Foods Inc., consists of global snacking and food brands. MDLZ's international portfolio includes Cadbury, Milka chocolate, Jacobs coffee, LU, Nabisco and Oreo biscuits, as well as Tang powered beverage and Trident gums. Since our last article of "Mondelez Is A Great Long-Term Holding With Promising Growth Potential," MDLZ had gained 9.27% and closed at $27.95 as of February 5, 2013. Recent developments will be updated for MDLZ and the current options play will be reviewed in this article.
"We think investors looking for sweeter growth prospects from a packaged food firm may want to consider the Mondelez global snacks business, while income investors will likely find the new Kraft Foods shares appetizing because paying a top-tier dividend is to be the firm's main use of cash."
Mobile strategy: MDLZ is teaming up with 9 start-up technology companies to explore how proprietary technology can drive impulse purchases and so-called "mobile-at-retail" consumer experiences related to Mondelez products.
IBM partnership: MDLZ and International Business Machines Corporation (IBM) are extending their partnership till September, 2015, which will help Mondelez International establish three SAP instances in three years. This multi-year partnership will help MDLZ improve its efficiency and optimize its resources in the long term.
Analysts, on average, are expecting an EPS of $0.38 with revenue of $9.69B for the current quarter ending in December 2012. Analysts are estimating an EPS of $1.41 with revenue of $35.29B for fiscal 2012. For 2013, analysts are projecting an EPS of $1.58 with revenue of $36.91B, which is 4.60% higher than 2013. MDLZ is expected to report its Q4, 2012 earnings on February 13, 2013, at 5:00PM.
Food Industry Snapshot and Competitors Update
On January 11, 2013, Goldman reduced its view on the food sector due to valuation and challenging fundamentals. The firm downgraded General Mills (GIS) to Sell from Neutral, J.M. Smucker (SJM) to Neutral from Buy, and removed Campbell Soup (CPB) from its Conviction Buy List. On January 30, 2013, as reported by The Wall Street Journal, Moody's Investors Service has placed its long-term ratings on General Mills Inc. on review for a possible upgrade, pointing to the packaged-food company's growing scale and diverse portfolio of strong brands. On February 4, 2013, Goldman downgraded Hershey (HSY) due to recent share strength. However, Goldman raised HSY's price target to $86 from $84. Lastly, on February 5, 2013, Kellogg Company (K) reported a smaller loss for Q4 and its adjusted result beat analyst estimates. Kellogg also reaffirmed its guidance for reported net sales growth, which is expected to increase by about 7% in fiscal 2013. Fiscal 2013 reported earnings per share are anticipated to grow between 5% and 7%.
Key Stats and Valuation
MDLZ has an enterprise value of $75.58 with a market cap of $49.67B. MDLZ has total cash of $3.96B with a total debt of $30.00B. MDLZ has a book value of $20.57 per share. MDLZ generates a strong cash flow of $5.03B with a levered free cash flow of $2.50B. By using Morningstar's data, MDLZ's key stats will be compared to its competitors, including The Hershey Company. MDLZ has higher revenue growth (3 year average) of 9.0, as compared to the industry average of 6.4. MDLZ has lower operating margin of 12.5%, ttm, and net margin of 6.2%, ttm, comparing to the averages of 13.9% and 8.4%, ttm, respectively. MDLZ also generates lower ROE of 9.1, as compared to the average of 36.2. MDLZ's P/E of 15.0 is lower than the industry average of 17.1 and lower than MDLZ's 5 year average of 17.9. MDLZ's forward P/E of 13.8 is lower than S&P 500's average of 14.0.
MDLZ closed at $27.95 with a 0.25% gain on February 5, 2013. MDLZ had been trading in the range of $24.31-$28.48 since its spin-off. MDLZ has a low beta of 0.57. The MACD (12, 26, 9) indicator is showing a bearish trend with the MACD Histogram closed at -0.035. The momentum indicator, RSI (14), is indicating a strong buying momentum at 62.73. MDLZ is currently trading above its 50-day MA of $26.59 and 200-day MA of $26.08. The next resistance is $28.67, the R1 pivot point, followed by $29.54, the R2 pivot point, as seen from the chart below.
The last reviewed credit put spread of June 22, 2013, $20/$23 put is currently yielding 12.74% return on margin, achieving 80.49% of the maximum gain of 15.83%. Investors can consider taking the profit after the recent run-up. A new credit put position of June 22, 2013, $22/$25 can be reviewed if MDLZ pulls back to the $26.5/$27 price range.
Note: All prices are quoted from the closing of February 5, 2013, and all calculations are before fees and expenses. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.