Last Update 28 Nov 25
Fair value Decreased 0.063%MDLZ: AI-Driven Cost Cuts Will Support Margin Expansion Amid Commodity Relief
Mondelez International's fair value estimate has been modestly reduced to $69.02 per share. Analysts cite softer Q3 results, evolving market dynamics, and tempered near-term earnings forecasts as key reasons for recent price target adjustments across the Street.
Analyst Commentary
Recent analyst commentary on Mondelez International reflects a blend of optimism about longer-term prospects and caution regarding near-term challenges. Revised price targets and earnings forecasts underscore shifting expectations as the company navigates evolving market dynamics and commodity cost pressures.
Bullish Takeaways
- Some analysts maintain optimistic ratings and highlight Mondelez as a compelling long-term play with reasonable valuation, despite current headwinds.
- Analysts are encouraged by prospects for organic sales growth and improved EPS by 2026, particularly as cocoa costs are anticipated to become deflationary. This could support margin expansion.
- There is confidence in the company's ability to reinvest cost savings into supply chain enhancements and flexible packaging, which could bolster efficiency and long-term productivity.
- Bullish analysts see Mondelez as well-positioned to benefit if cocoa price trends remain favorable. This may enable further investment in pricing and marketing initiatives.
Bearish Takeaways
- Bearish analysts point to slower near-term sales growth, driven by higher price elasticity in Europe and pockets of weakness in emerging markets. These factors could pressure financial results.
- Recent downward revisions in price targets reflect concerns about softer third-quarter performance and a more challenging demand environment for consumer staples into next year.
- Commentary highlights uncertainty around the extent to which cocoa price relief will boost earnings in the short run, given reinvestment plans and subdued expectations for significant EPS upside.
What's in the News
- Mondelez is using a newly developed AI tool to reduce marketing content production costs by 30% to 50%. The company expects the tool to be able to create TV ads as soon as next year's holiday season (Reuters).
- The company is actively working to switch food dyes in its products from synthetic to natural sources, in response to changing consumer preferences and regulatory requirements (Reuters).
- Jon Halvorson, who spent the past eight years at Mondelez, is expected to be named chief marketing officer at Kenvue. This comes amid ongoing PR challenges related to Tylenol (The Wall Street Journal).
Valuation Changes
- Fair Value Estimate: Slightly reduced from $69.07 per share to $69.02 per share.
- Discount Rate: Marginally decreased from 6.96% to 6.96%.
- Revenue Growth: Edged upward from 4.21% to approximately 4.21%.
- Net Profit Margin: Dipped from 10.79% to 10.77%.
- Future P/E Ratio: Increased from 21.31x to 23.56x, reflecting higher earnings multiple projections.
Key Takeaways
- Mondelez's global pricing strategy and strategic growth agenda aim to increase revenue and market share, especially in Europe and emerging markets.
- Innovative brand activations and sustainability initiatives are expected to enhance consumer engagement, brand loyalty, and long-term value creation.
- Elevated cocoa costs and decreased consumer demand are pressuring profit margins, with potential risks from economic uncertainties and trade tensions impacting future revenues.
Catalysts
About Mondelez International- Through its subsidiaries, manufactures, markets, and sells snack food and beverage products in the Latin America, North America, Asia, the Middle East, Africa, and Europe.
- Mondelez International is executing a robust pricing strategy in response to high cocoa costs, which is expected to improve revenue as pricing takes effect globally, especially in markets like Europe and emerging markets.
- The company is implementing a strategic growth agenda that includes reinvesting in brands, expanding distribution, and strengthening market presence, which should positively impact revenue growth and market share.
- Mondelez’s focus on innovative brand activations and product collaborations, like the Oreo and Post Malone partnership and Cadbury Dairy Milk with Lotus Bakeries, are expected to enhance consumer engagement and drive revenue growth.
- The ongoing investment in sustainability initiatives, such as scaling the Cocoa Life program and reducing carbon emissions, is likely to support long-term value creation and enhance brand loyalty, potentially improving net margins.
- Mondelez continues to expand its presence in emerging markets, adding over 100,000 stores, which is expected to drive growth in market share and revenue as consumer confidence stabilizes and economic conditions improve in these regions.
Mondelez International Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Mondelez International's revenue will grow by 4.8% annually over the next 3 years.
- Analysts assume that profit margins will increase from 9.8% today to 11.1% in 3 years time.
- Analysts expect earnings to reach $4.7 billion (and earnings per share of $3.8) by about September 2028, up from $3.6 billion today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.4x on those 2028 earnings, up from 22.2x today. This future PE is greater than the current PE for the US Food industry at 19.5x.
- Analysts expect the number of shares outstanding to decline by 3.23% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.
Mondelez International Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Elevated cocoa costs significantly impacted adjusted gross profit and consequently affected EPS, posing a risk to net margins if prices remain high or increase further.
- North America experienced a decline due to retailer destocking and softer consumer demand, particularly from lower-income households, which could continue to pressure earnings and margins.
- Volume/mix was down 3.5% due to elasticity, with potential future risks if consumers continue to react negatively to higher prices, leading to revenue challenges.
- Consumer confidence in key markets like Brazil, Mexico, and China is soft due to economic uncertainty, which could impact demand and subsequently revenue and earnings growth.
- Increasing trade tensions and potential tariff impacts, although manageable now, could create future expense pressures or require strategic adjustments, affecting net profits.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $74.417 for Mondelez International based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $88.0, and the most bearish reporting a price target of just $67.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $42.7 billion, earnings will come to $4.7 billion, and it would be trading on a PE ratio of 22.4x, assuming you use a discount rate of 6.8%.
- Given the current share price of $62.57, the analyst price target of $74.42 is 15.9% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.