Mondelez International, Inc. (MDLZ) REPORT Gabelli research analyst Sarah Donnelly (1-30-2018)
We continue to recommend Mondelez, a global snacking leader based Deerfield, Illinois
Mondelez has a sixty four billion market cap,eighteen point eight billion net debt and six billion of other assets for a total Enterprise value of $76 billion
Mondelez is a market share leader across several categories competing in the $1.2 billion global snacking market, including biscuits and chocolate.
The company generates nearly 85% of its $26 billion of revenue from its snacking portfolio,
which includes leading brands such as Oreo, Ritz, and Cadbury.
Snacking is growing in the low single digits both in the US and around the world.
The company is geographically diversified as nearly 75% of sales are generated outside the US,
including over 35% from emerging markets plus Mondelez will see a modest benefit from a weaker US dollar.
Operating margins have expanded by over 450bps in the last three years but there is still room to improve; which was reaffirmed by management – whos committed to achieving a 17-18% operating margin in 2018.
The company has a strong balance sheet, including two investments in coffee joint ventures which are likely to be monetized over time. this in addition to a new CEO effective November 2017, Dirk Van de Put, who is tasked with accelerating growth while also achieving its margin targets.
In conclusion, Mondelez is expected to generate industry-leading results over the next five years, including high single digit growth from the estimated $2.15 per share in 2017.
This growth trajectory, coupled with strong free cash flow and balance sheet validates a premium valuation to its peers, accordingly we calculate a PMV of $57 per share based on 2019 estimates.