Mondelez International, Inc. (MDLZ) is set to report second-quarter 2014 results on Aug 6. Last quarter, the company delivered a positive earnings surprise of 18.2%.
Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Mondelez has been reporting soft top-line results ever since it split from Kraft Foods Group, Inc. (KRFT) in Oct 2012. Emerging market choppiness, continued headwinds from coffee pricing and slower global category growth have been weighing on the company’s top line. Mondelez’s categories slowed down in 2013 and are not expected to accelerate much in 2014. The company’s gum business has also been down for the last few quarters, mainly in the developed nations such as the U.S. and Europe.
In the first quarter, sales declined 1% due to global snack category slowdown (particularly in the emerging markets), weak biscuit sales in China and lower coffee pricing. Management expects these headwinds to continue in the second quarter as well resulting in similar top-line performance as seen in the first quarter. Moreover, even though rising coffee prices will benefit the top line in the second half, management expects revenues to improve only modestly due to emerging market choppiness.
Though sales have been slower, Mondelez has delivered relatively better margins through cost savings and productivity improvement.
Earnings Whispers?
Our proven model does not conclusively show that Mondelez is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Negative Zacks ESP: The Earnings ESP is 0.00%.
Zacks Rank:Mondelez has a Zacks Rank #2 (Buy). However, the favorable rank when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other consumer staples stocks that have both a positive Earnings ESP and a favorable Zacks Rank are:
SUPERVALU Inc.(SVU), with an Earnings ESP of +9.09% and a Zacks Rank #2.
Keurig Green Mountain, Inc.(GMCR),with anEarnings ESP of +2.30% and a Zacks Rank #3 (Hold).
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