Mondelez (NASDAQ:MDLZ) Posts Better-Than-Expected Sales In Q1

Petr Huřťák /
2024/04/30 4:36 pm EDT

Packaged snacks company Mondelez (NASDAQ:MDLZ) reported Q1 CY2024 results topping analysts' expectations, with revenue up 1.4% year on year to $9.29 billion. It made a non-GAAP profit of $0.95 per share, improving from its profit of $0.86 per share in the same quarter last year.

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Mondelez (MDLZ) Q1 CY2024 Highlights:

  • Revenue: $9.29 billion vs analyst estimates of $9.16 billion (1.5% beat)
  • EPS (non-GAAP): $0.95 vs analyst estimates of $0.89 (7% beat)
  • Full year guidance for organic revenue growth and EPS growth maintained from previous outlook
  • Gross Margin (GAAP): 51.1%, up from 37.6% in the same quarter last year
  • Free Cash Flow of $1.03 billion, down 16.8% from the previous quarter
  • Organic Revenue was up 4.2% year on year
  • Sales Volumes were down 2.1% year on year
  • Market Capitalization: $96.62 billion

“We posted solid top-line results coupled with robust earnings and free cash flow generation in the first quarter driven by strong pricing execution, effective cost management and emerging market momentum,” said Dirk Van de Put, Chair and Chief Executive Officer.

Founded as Nabisco in 1903, Mondelez (NASDAQ:MDLZ) is a packaged snacks powerhouse best known for its Oreo, Cadbury, Toblerone, Ritz, and Trident brands.

Shelf-Stable Food

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Sales Growth

Mondelez is one of the most widely recognized consumer staples companies in the world. Its influence over consumers gives it extremely high negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don't have).

As you can see below, the company's annualized revenue growth rate of 10.1% over the last three years was decent as consumers bought more of its products.

Mondelez Total Revenue

This quarter, Mondelez reported decent year-on-year revenue growth of 1.4%, and its $9.29 billion in revenue topped Wall Street's estimates by 1.5%. Looking ahead, Wall Street expects sales to grow 3.6% over the next 12 months, an acceleration from this quarter.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Mondelez generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Mondelez's average quarterly volume growth was a healthy 1.6%. Even with this good performance, we can see that most of the company's gains have come from price increases by looking at its 12.8% average organic revenue growth. The ability to sell more products while raising prices indicates that Mondelez enjoys some degree of inelastic demand.

Mondelez Year-On-Year Volume Growth

In Mondelez's Q1 2024, sales volumes dropped 2.1% year on year. This result was a reversal from the 3.2% year-on-year increase it posted 12 months ago. A one quarter hiccup shouldn't deter you from investing in a business. We'll be monitoring the company to see how things progress.

Key Takeaways from Mondelez's Q1 Results

It was good to see that revenue and EPS beat in the quarter. The company maintained its full year guidance for organic revenue growth and EPS growth, showing that the demand environment is unchanged from roughly three months ago when they gave the prior outlook. Zooming out, we think this was a fine quarter with no huge surprises. Investors were likely expecting more, however, and the stock is down 1.8% after reporting, trading at $70.64 per share.

So should you invest in Mondelez right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.