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Shares of Mondelez International Inc. rallied after hours on Tuesday, after the global snack maker raised its sales and profit forecasts and reported third-quarter results that topped expectations, citing a “resilience” in demand following signs of a more anxious consumer as prices rise.
Management for Mondelez
MDLZ,
which makes snacks like Oreo cookies and Triscuits, said customers continued to view those and other snacks as “affordable indulgences.” Chief Executive Dirk Van de Put said shoppers were less likely to switch to cheaper, private-label brands for chocolates, crackers, biscuits and cookies when compared to other types of food.
“We see consumers saying that chocolate is really something they cannot live without,” he said.
He made the remarks as customers in Europe — which drives a big chunk of Mondelez’s sales — remain wary of inflation and Mondelez’s own price increases, which have boosted its results. The U.S., he said, remained relatively upbeat. Consumer confidence in emerging markets was also solid, he said.
Mondelez reported third-quarter net income of $533 million for the third quarter, or 39 cents a share, down from $1.26 billion and 89 cents a share in the prior-year period.
Sales rose 8.1% to $7.76 billion, compared with $7.18 billion in the same period last year, with a smaller 0.7% uptick in volume and product mix.
Adjusted for things like goodwill and debt extinguishment, Mondelez reported 74 cents a share, compared with 70 cents a year ago.
Analysts polled by FactSet expected adjusted earnings per share of 69 cents, on revenue of $7.44 billion.
Mondelez raised its full-year organic net sales growth forecast to 10% or more, compared to an earlier outlook for 8% or more. Executives also raised their full-year adjusted earnings-per-share forecast, on a constant-currency basis, to 10% growth or more, compared to prior expectations for “mid-to-high single digits.” It kept its outlook for free cash flow at $3 billion or more.
For the full year, FactSet expected Mondelez to earn $2.88 per share, on sales of $30.48 billion.
“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,” Van de Put said in a statement earlier in the day.
Shares rose 3.4% after hours.
Mondelez also makes items like Chips Ahoy cookies, Cadbury and Toblerone chocolates, and Ritz crackers. The company also recently completed its acquisition of Clif Bar.
Ahead of the earnings, analysts said Mondelez faces a tough foreign exchange backdrop. A majority of its sales come from outside North America, with Europe last year generating the biggest amount. Company executives earlier in the year also noted changes in customer behavior, as inflation and recession worries escalate.
Van de Put, during a conference in September, said U.S. and European customers were getting more anxious, with those in Europe seeking cheaper options. And in July, executives noted “some elements of customer disruption in Europe” as a result of bigger recent price increases.
But even as consumers grow more concerned about rising prices, Mizuho analyst John Baumgartner, in a research note on Monday, said global snacking demand had retained its “resilience.”
Stifel analysts, in a note last month, also said Mondelez was among the companies that was able to “maintain the best pricing power in the industry,” and that it gained market share during the lockdown phase of the pandemic, when boredom and stress prevailed. And they said the company had seen “remarkable consistency in
the growth of their categories through varying economic conditions.”
“In the second half, although the company expects to see some softening consumer confidence in its developed markets, its categories are expected to remain solid and produce some volume growth in addition to strong pricing,” the Stifel analysts said.
Mondelez over the past decade has tried to expand its chocolate and biscuits segments, of which Cadbury, Oreos, Ritz and others are a part. At its investor day in May, it outlined plans to eventually draw 90% of sales from those categories, saying they were “historically durable categories in both developed and emerging markets.”
Mondelez stock has fallen around 7% through this year. Over that time, the S&P 500 Index
SPX,
has slid around 19%.
