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.