MDLZ: AI Cost Cuts Will Support Future Margin Expansion Despite Demand Headwinds

Analysts have modestly reduced their price targets on Mondelez International, trimming the equity fair value estimate by about $0.17 per share to reflect slightly lower long term growth and earnings expectations amid softer consumer demand and a recalibration of valuation multiples.

Analyst Commentary

Street research reflects a generally cautious but still constructive stance on Mondelez, with most firms trimming price targets while maintaining ratings that range from Neutral to positive. The modest downward revisions are being driven by softer volume trends, elevated price elasticity in Europe, and lower outer year earnings estimates, partly offset by an improving cocoa cost outlook and longer term confidence in the companys category leadership.

Analysts note that the Q3 update and forward guidance have reset expectations for near term growth. They also emphasize that Mondelez retains meaningful levers on pricing, mix, and cost efficiency. The resulting valuation framework now embeds lower multiples and slightly lower earnings trajectories, yet still assumes the company can deliver attractive returns once current demand headwinds and input cost volatility begin to normalize.

Bullish Takeaways

• Bullish analysts highlight that, even with lower targets, current valuations still imply upside if Mondelez can stabilize elasticity in Europe and re accelerate organic growth by 2026.
• Several see cocoa turning deflationary in 2026, which could support margin expansion and earnings growth, particularly if the company captures a portion of the cost savings rather than fully reinvesting.
• Long term oriented views emphasize Mondelezs strong brands and category exposure, framing the stock as a compelling multi year play once near term demand and cost pressures abate.
• Some analysts argue that the recalibrated expectations reduce downside risk to estimates, creating a cleaner setup for upside surprises if volumes and emerging market trends improve.

Bearish Takeaways

• Bearish analysts point to higher than expected price elasticity in Europe and emerging market softness as signals that Mondelez may face a slower growth profile and more volatile volumes than previously assumed.
• Lowered outer year earnings estimates and the use of reduced valuation multiples suggest concern that the company will struggle to fully offset demand headwinds through pricing, mix, and productivity alone.
• Some see the plan to reinvest much of the cocoa cost benefit into pricing, advertising, and the U.S. supply chain as limiting near term EPS leverage, keeping earnings growth more muted than prior cycles.
• JPMorgan and other cautious voices expect near term results to fall slightly below consensus, reinforcing the risk of additional estimate cuts if consumer and competitive pressures persist into FY25.

What's in the News

• Mondelez is rolling out an AI powered marketing content tool developed with Accenture, expected to cut production costs by 30 to 50 percent and generate TV ready ads as early as next year's holiday season (Reuters).
• The company says it is actively transitioning products that use synthetic colors to natural dyes, aligning with changing consumer preferences and regulatory trends, though no firm timeline has been provided (Reuters).
• Jon Halvorson, Mondelez's global senior vice president of consumer experience, is expected to be named chief marketing officer at Kenvue after spending eight years at Mondelez. This highlights the company's marketing bench strength (Wall Street Journal).
• From July 1, 2025 to September 30, 2025, Mondelez repurchased about 3.8 million shares for roughly $240 million, completing a broader buyback of 30.6 million shares totaling about $1.8 billion under its December 2024 authorization (company filing).
• Mondelez reaffirmed financial guidance for 2025, targeting organic net revenue growth of at least 4 percent, which underscores management's confidence in the medium term demand outlook (company guidance).

Valuation Changes

• Fair Value Estimate edged down slightly from $69.02 to $68.85 per share, reflecting modestly lower long term assumptions.
• Discount Rate was essentially unchanged, moving fractionally from 6.96 percent to 6.96 percent, indicating a stable risk assessment.
• Revenue Growth ticked down slightly from 4.21 percent to 4.20 percent, signaling a marginally softer top line outlook.
• Net Profit Margin increased very slightly from 10.77 percent to 10.77 percent, implying a minor improvement in long run profitability assumptions.
• Future P/E Multiple eased modestly from 23.56x to 23.50x, pointing to a small compression in the valuation applied to forward earnings.