Mondelez International, Inc. MDLZ reported fourth-quarter 2018 results, wherein the company posted in-line earnings, while sales came ahead of the Zacks Consensus Estimate. Improved pricing and productivity savings aided results, though escalated costs and adverse currency movements were a worry.
Notably, this Zacks Rank #3 (Hold) stock has gained 3.4% in the past three months against the industry’s decline of 9.2%.
Q4 Performance
Adjusted earnings of 63 cents per share came in line with the Zacks Consensus Estimate. On a constant-currency (cc) basis, adjusted earnings rallied 21% year over year, courtesy of operating gains and higher equity income.
Mondelez International, Inc. Price, Consensus and EPS Surprise
Mondelez International, Inc. Price, Consensus and EPS Surprise | Mondelez International, Inc. Quote
Net revenues dropped 2.8% year over year to $6,773 million due to currency headwinds. However, revenues surpassed the Zacks Consensus Estimate of $6,758 million. On an organic basis, revenues rose 2.5%, thanks to continued emerging market strength from favorable pricing and volume/mix.
Revenues from the emerging markets declined 4.5% to $2,441 million but increased 6.5% on an organic basis. Revenues from the developed markets dipped 1.7% to $4,332 million, while on an organic basis the same climbed 0.2%.
Regionally, revenues in Europe, Latin America, and Asia, Middle East & Africa declined 2.3%, 15.2% and 1.4%, respectively. Nonetheless, on an organic basis, revenues across these regions depicted respective improvements of 2.3%, 3.9% and 4%. In North America, revenues rose 1.6% and grew 0.8% organically.
Adjusted gross profit grew $147 million, while adjusted gross margin expanded 90 basis points (bps) to 40.0%. The margin expansion was backed by productivity savings and greater pricing, somewhat negated by escalated raw-material expenses.
Also, the company’s adjusted operating income (on a cc basis) increased $79 million from the prior-year quarter’s figure. Further, adjusted operating margin expanded 50 bps year over year to 16.2% on the back of solid pricing and productivity savings, partly countered by increased raw material and SG&A costs.
Other Financials
Mondelez ended the quarter with cash and cash equivalents of $1,100 million, long-term debt of $12,532 million and total equity of $25,713 million.
During 2018, Mondelez generated cash from operating activities of $3.9 billion, while its free cash flow came in at $2.9 billion.
During the fourth quarter, the company repurchased shares worth roughly $400 million and paid cash dividends of about $400 million. In 2018, management bought back shares worth $2 billion and paid dividends worth $1.4 billion.
Guidance
Management is impressed with its 2018 show, which reflects the company’s brand strength, solid international position and robust initiatives. For 2019 as well, management is on track with its core new strategy to undertake new investments to fuel growth in organic revenues and operational organization-wide excellence.
Management expects organic net revenue growth of 2-3%. Further, management anticipates currency fluctuations to negatively impact net revenue growth by nearly 3%.
Mondelez envisions currency-neutral adjusted earnings per share to grow 3-5%, with currency headwinds expected to have a 7 cents impact.
Apart from this, the company expects 2019 free cash flow of approximately $2.8 billion.
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