How High Can Mondelez Stock Go?

The product range Mondelez supports is enormous, from gum and candy to various cheeses, grocery items, and powdered drink products in some markets. Its products are in over 80 countries and encompasses 91,000 employees around the world.

MDLZ share price has been steadily rising in recent years, so high can it go?

Is India Where Growth Lies For Mondelez?

In June, Mondelez and Lotus Bakeries announced they were partnering to grow the Lotus Biscoff® cookie brand in India. They also aim to make new chocolate products that mix the special caramelized, crunchy Biscoff® flavor with famous chocolates like Cadbury and Milka from Mondelēz in Europe. There is a chance this new launch could expand worldwide.

The partnership plan is for Mondelēz to use its wide distribution network and established presence in local markets to promote and sell Biscoff® cookies. The goal is to bring more cookie choices into high-demand premium areas.

Opportunities abound globally for the candy maker. A few months ago, Mondelez reported that it had opened a new Regional Biscuit and Baked Snacks Lab and Innovation Kitchen in Singapore, highlighting the company’s willingness to create new products for Southeast Asia, Australia, New Zealand, and Japan.

With over $5 million in investment support, the new facility builds on what already exists at the company’s Singapore Technical Centre. This center first started in 2006 and expanded in 2018 to put more effort into creating new ideas and developing products, especially for gum and candy. These developments all bode well for the company’s future growth.

Organic Revenue Set To Rise

Management reported good top line results in the first quarter of fiscal 2024, with strong earnings and free cash flows. This good news stemmed from effective pricing, smart cost control, and growth in emerging markets.

In the quarter that finished on March 31, 2024, Mondelez’s net revenue was $9.29 billion, up 1.4% year-over-year. At the same time, gross profit increased by 37.8%, compared to last year’s value, to $4.75 billion. Plus, the company’s operating income rose 81.2% from the year-ago value to $2.73 billion.

Mondelez’s cash inflow from operating activities was $1.32 billion versus $1.12 billion in the same quarter of the previous year.

Impressively, Mondelez’s total current assets last quarter reached $19.43 billion, a meaningful increase from the $11.70 billion at the end of 2023. 

Going forward management anticipates organic net revenue to increase by 3% to 5%. Adjusted EPS growth is expected to reach high single-digits on a constant currency basis and anticipates that free cash flow for 2024 will exceed $3.5 billion.

How Is Mondelez’s Dividend Growth?

Mondelez has been raising its dividends for ten years straight. Its current dividend is $1.70, translateing to an annual dividend yield of 2.53%.

The company’s dividends have increased at a CAGR of 10.5% over the last three years, and its four-year average dividend yield is 2.17%.

The company recently announced a regular quarterly dividend of $0.425 for each share of Class A common stock. This payment was made on July 12, 2024, to those who were shareholders by the end of business day on June 28, 2024. 

Pros and Cons of Mondelez

On the plus side, Mondelez has maintained dividend payments for 24 years and increased them every year for a decade.

It’s a highly profitable company with a 23.9x price-to-earnings ratio and modest growth in net income of 2.4% forecasted annually over the next 5 years.

With $3.9 billion in net income, even these small projected increases translate to tens of millions of dollars, a sufficient amount to scoop up smaller rivals and swallow up competition.

On the downside, 13 analysts have revised their estimates lower for earnings in the upcoming quarter and debt levels are somewhat elevated, a key area to watch for long-term investors. For now, though, Mondelez is a relatively stable company that passes on cost increases to consumers over time and generally has a share price that rises over the long-term.

Key Profitability Metrics

Mondelez trailing-12-month gross profit margin is 41.69%, eclipsing rivals in the industry who average 35.15%.

The company has a trailing-12-month EBITDA margin of 23.30%, which is 85.3% higher than the sector’s average of 12.57%.

Plus, the company’s trailing-12-month net income margin is 11.87%, higher by 159.3% when we see the industry average of 4.58%. Its trailing-12-month levered FCF margin of 9.91% shows an increase of 70.9% more than the 5.80% industry average, indicating that the candy giant greatly outperforms its industry peers across multiple financial metrics.

How High Can Mondelez Stock Go?

The consensus among 24 analysts is that Mondelez stock can go as high as $78.42 per share before reaching fair value.

For the fiscal year ending in December 2024, analysts forecast that revenues will climb just 2.2% to reach $36.79 billion while earnings per share are forecast to reach $3.48, corresponding to a rise of 9.1% versus last year.

Over the past four quarters, the company has beaten both revenue and EPS expectations, a positive sign for shareholders that management have their financials dialed in.

Peering into next year, analysts forecast that the top line will rise by another 4.9% to $38.58 billion and EPS is set to grow by 5.6% versus last year to $3.67. 

Market sentiment skews heavily positive with 16 of 17 analysts rating Mondelez as a Buy with as much as 18.62% upside from current levels. 

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