- Credit Suisse analyst Robert Moskow reiterated an Outperform rating on the shares of Mondelez International Inc MDLZ and lowered the price target to $67 from $70.
- The analyst finds it difficult to reconcile company management's positive tone with the challenging economic developments unfolding in Europe.
- Meanwhile, the analyst raised topline growth to 9% because management indicates that elasticities have held up better than the conservative assumptions they provided in their 2H guidance.
- The management also described sales trends in Europe as relatively unchanged from 1H and said that price negotiations in the region passed through as expected with only modest disruptions.
- Moskow said with economic conditions in the region in such a state of flux, investors hoping that management will return its guidance to the high end of its MSD-HSD EPS range might be disappointed.
- The analyst lowered the FY22 EPS estimate by $0.04 to $2.82, assuming an incremental FX headwind of $0.06 to EPS and a $0.03 reset in the 2021 EPS base from reducing the equity stake in JDEP and divestitures.
- Given that pricing passed through smoothly, the company should have some upside to drop to the bottom line, added Moskow.
- Despite the cloudier outlook for Europe, he expects sales guidance to revise positively to more than 9% from 8%.
- The analyst noted that Nielson tracking data indicates 9% sales growth in the U.S., with pricing climbing to 18% and volume down -9%.
- Market share in North American biscuits remained pressured owing to supply chain constraints, exacerbated in part by the company's supply chain consolidation.
- Investor Relations said that the European data does not accurately reflect the company's performance, thus making the situation difficult to evaluate, noted Moskow.
- Price Action: MDLZ shares are trading higher by 1.40% at $58.25 on the last check Tuesday.
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