The sell side is supportive of Mondelez International (NASDAQ: MDLZ) and helping to drive the share prices higher. The institutions have been net buyers for 4 of the last 5 quarters and have their ownership up to 76% of the company and growing. The analysts, in the wake of the Q3 earnings results, are gushing and think the company could outperform even its raised guidance.
The Analysts Like Mondelez Q3
Several analysts have come out with bullish commentary including BMO Capital and Morgan Stanley (NYSE: MS). They have the price target firming after falling slightly from a peak set earlier this year. As it is, the consensus price target is about 13% above the post-release price action and edging higher in the near term. Assuming the company is able to perform as the analysts expect, the odds are high that the consensus price target will continue to move higher over the next several quarters.
“The success of this quarter and the year-to-date performance provides high confidence in this new higher guidance for the year and it confirms the industry-leading growth characteristics of Mondelez’s model – this business is really flourishing amidst the heavy reinvestment in the business and even as pricing is pushing higher … We continue to marvel at the financial performance of this company which, quarter in and quarter-out is not only leading the food industry but is at the top-tier of its Consumer Staples peers even as its valuation lags those peers,” said Stiffel analyst Christoper Growe.
Mondelez Proves Snacks Are Inflation Proof
Mondelez International had a good quarter and brought in $7.76 billion for a growth of 8.1% over last year. This is $0.320 billion better than expected or 430 basis points above the consensus estimate driven by pricing increases and volume growth. On an organic basis, revenue is up 12.1% with a 0.7% addition from volume/mix that was offset by FX headwinds that will continue to blow in the coming quarters. Growth was strongest in Latin America but these results include the addition of new properties in Mexico that effectively doubled its business in that country.
The truly good news is that revenue strength was not only able to carry through to the bottom line but that margins improved more than expected. The company’s operating margin shrank a mere 110 basis points on an adjusted basis to leave EPS at $0.74 or up 15% from last year. As for the guidance, the company continues to expect a 600 basis point+ headwind from FX in its international divisions but was able to raise the organic outlook for revenue growth by 200 basis points.
"Our third quarter performance demonstrates the resilience of our snacking categories, strength of our brands, broad-based net revenue growth of both our emerging and developed markets, effective execution of pricing, and solid volume growth, enabling us to raise our full-year revenue and earnings outlook,” said Dirk Van de Put, Chairman and Chief Executive Officer.
Mondelez Sweetens The Deal With Value And Yield
Mondelez isn’t a cheap consumer staple stock but it is a value relative to peers when it is trading at 21.5X earnings. Other snacking names like Pepsico and Hormel are trading at much higher valuations that suggest a multiple-expansion could be in play. Turning to the chart, the stock is up in the wake of the report but showing signs of resistance at the $65 level. If this price level can’t be overcome the stock could remain range bound. The silver lining is the 2.5% is safe and the distribution is expected to grow. 
