Snack food giant Mondelez International (NASDAQ: MDLZ) the stock trades down (-13%) for the year that outperforms the S&P 500 (NYSEARCA: SPY)), which fell respectively (-25%). Mondelez is the world’s best seller of biscuit cookies and the 3rd biggest chocolatier for #5 Hershey (NYSE: HSY). It sells snacks in more than 150 countries under more than 35 brands, including Chips Ahoy, Original Philadelphia, Marabou, Sour Patch, Ritz, Wheat Thins, Triscuit and Aspen Gold. The acquisition of Clif Bar will strengthen its snack bar business into a multi-billion dollar franchise. The company was previously known as Kraft Foods and was spun off from . in 2012. Kraft Heinz (NYSE: KHC). Mondelez owns popular snack brands including Cadbury, Milka and Toblerone chocolates, Oreo, belVita and LU cookies, and Trident gum. High raw material and transport costs inflation had an impact on margins, despite price increases. Developed markets show a weakening of weakening consumer confidence but emerging markets remain strong. Its line of comfort and cheap snacks revenues remain resilient despite economic headwind or seasonality. It competes with packaged food giants such as Conagra Foods (NYSE: CAG), Hormel (NYSE: HRL), Lamb Weston (NYSE: LW)and Campbell’s Soup (NYSE:CPB) without competing for the same shelf space in retailers and grocers such as Target (NYSE:TGT), Walmart (NYSE: WMT), Walgreens (NYSE: WBA)and Kroger (NYSE: KR). The popularity of the brand’s snacks and candies provides a deep moat against generic and private-label knock-offs.
The Winning Machine
On July 28, 2022, Mondelez announced its second quarter 2022 results for the quarter ended June 2022. The company reported earnings per share (EPS) of $0.67 excluding one-time items, which beat analysts’ estimates of $0.64 by $0.03. Net revenues grew 9.5% year-over-year (year-on-year) to $7.27 billion, beating consensus analyst estimates of $6.8 billion for the quarter. Organic net income was up 13.1% with underlying volume/mix of 5.1%. The company returned $2.5 billion to shareholders in the first half of 2022. The company increased its dividend to $0.385 per share. Mondelez acquires Clif Bar, a maker of protein snack bars. The company sees 8% organic net sales growth for the full year 2022.
Growth and resilience
Dirk Van de Put, CEO of Mondelez, commented: “Our chocolate and biscuit business continues to show strong volume growth and price stability in both developed and emerging markets. These results combined with continued cost discipline, simplification and revenue growth management deliver robust dollar earnings growth and strong cash flow, enabling us to increase our dividend by 10 percent.” The acquisition of Clif Bar will enable Mondelez to create a billion dollar snack bar company with domestic and international expansion capabilities.
Mondelez presented his solutions for tackling headwinds such as inflation, supply chain and a strong US dollar. Inflation fueled by the pandemic speeds up import costs, including: energy, transportation, packaging, wheat, dairy and edible oils. The company is taking price action in key markets to ease inflationary pressures. They are now 85% hedged for the remainder of 2022, almost completely hedged in key areas. Supply chain volatility is particularly felt in the US due to under-supply of trucks and containers and labor shortages at external suppliers. The company is improving its production and warehouse capacity, implementing new measures to support retention and prioritizing key SKUs. To mitigate the strength of the US dollar against the euro and British pound, the company hedges currencies and net investments. To be packaged brands have a long shelf life and are inexpensive, further helping to support sales, even during recessions.
Clif Bar Acquisition
The acquisition of Clif Bar has many benefits, including entering the US protein and energy bar market as the No. 1 player. Clif is the leader in the fastest growing segment of protein and energy. The global snack bar market is growing 5% annually to over $16 billion. It currently has annual sales of over $800 million with expansion opportunities outside of the US. The acquisition complements the existing snack bar brands Perfect Snacks and Enjoy Life and will generate significant cost synergies in manufacturing and packaging.
This is what the charts say
Using the gun cards on the weekly and daily time frames gives a bird’s eye view of the landscape for MDLZ stock. The Downtrend of the Weekly Gun Chart has a descending 5-period moving average (MA) resistance also overlapping the $57.38 Fibonacci (fib) level. The 200-period weekly MA is slowly rising to $56.97. The weekly lower Bollinger Bands (BBs) are at $53.81. the weekly market structure layer (MSL) buy activated sits at $57.93. The daily gun chart is trying to make a breakthrough as the 5-period MA rises at $56.78 to cross the 15-period MA at $56.79 as the stochastic rises towards the 40 band. The daily 50-period MA stands at $60.74. The daily upper BBs are at $61.62 and the daily lower BBs are at $53.43. Attractive pullback levels are $56.71, $56.29, $54.82 fib, $53.27 fib, $52.51 fib, $50.64 and the $49.61 fib level.