Mondelez Q2 Earnings in the Cards: Factors to Watch

Mondelez International, Inc. MDLZ is likely to register a top-line decrease when it reports second-quarter 2024 earnings on Jul 30. The Zacks Consensus Estimate for revenues is pegged at $8.39 million, which indicates a 1.3% decline from the year-ago period.

However, the bottom line is likely to increase year over year. The consensus mark for earnings has dipped by a penny in the past 30 days to 78 cents per share, though it indicates 2.6% growth from the year-ago quarter's earnings of 14 cents. MDLZ has a trailing four-quarter earnings surprise of 7.7%, on average.

Factors to Note

Like other food companies, Mondelez remains affected by a dynamic macroeconomic scenario. The company has been witnessing volatile consumer behaviors, especially among lower-income segments, which has also led to a category slowdown and a little bit of market share loss to private label brands.

In several markets, shoppers are becoming increasingly price-sensitive, leading them to choose smaller pack sizes in both biscuits and chocolates. In its first-quarter 2024 earnings release, management stated that consumer confidence varied by region. Specifically, mixed confidence in major markets like North America and Australia/New Zealand may hinder revenue growth and signal potential weaknesses in these critical areas. Our model suggests a 1% decline in sales in the emerging markets during the second quarter.

Apart from this, Mondelez has been battling cost inflation, especially due to cocoa prices. Management stated that emerging markets like Nigeria, Pakistan and Egypt are facing significant inflationary pressures, which we believe may hurt consumer demand and profitability. Additionally, mounting promotional activities remain a threat to profit margins. Nonetheless, Mondelez has been on track with efficient pricing actions to cover the inflation. Our model suggests a 70-basis point adjusted gross margin expansion for the second quarter.

Additionally, continuous reinvestments in its brands and capabilities, along with impressive portfolio reshaping efforts, bode well.  A focus on core categories such as chocolate, biscuits and baked snacks has been working well, as these categories have historically depicted resilience to economic downturns and pricing actions. Also, the company has been committed to enhancing brand appeal, and prioritizing operational efficiency and cost management. These factors are likely to have acted as upsides in the to-be-reported quarter.

What the Zacks Model Unveils

Our proven model doesn't conclusively predict an earnings beat for Mondelez this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

Mondelez currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -0.63%.

Stocks With the Favorable Combination

Here are some companies worth considering, as our model shows that these have the right combination of elements to beat on earnings this reporting cycle.

Colgate-Palmolive CL currently has an Earnings ESP of +0.45% and a Zacks Rank #2. The company is expected to register top and bottom-line growth when it reports second-quarter 2024 numbers. The Zacks Consensus Estimate for CL's quarterly revenues is pegged at $5 billion, which suggests growth of 4.1% from the prior-year quarter's reported figure.

The Zacks Consensus Estimate for Colgate-Palmolive's quarterly earnings has been unchanged in the past 30 days at 87 cents per share. The estimate suggests almost 13% growth from the year-ago reported quarter. CL delivered an earnings surprise of 4.4%, on average, in the trailing four quarters.

Procter & Gamble PG currently has an Earnings ESP of +0.76% and a Zacks Rank #3. The company is likely to register top-line growth when it reports fourth-quarter fiscal 2024 numbers. The consensus mark for revenues is pegged at $20.75 billion, which implies growth of around 1% from the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for Procter & Gamble's quarterly earnings per share of $1.37 is in line with the figure reported in the year-ago quarter. PG has a trailing four-quarter earnings surprise of 6.5%, on average.

Clorox CLX has an Earnings ESP of +1.51% and a Zacks Rank of 3 at present. The company is expected to register a top and bottom-line decline when it reports fourth-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for CLX's quarterly earnings has risen by a penny in the past seven days to $1.54 per share, which indicates a fall of 7.8% from the year-ago period quarter.

The Zacks Consensus Estimate for Clorox's quarterly revenues is pegged at $1.98 billion, which implies a drop of around 2% from the figure reported in the year-ago quarter. CLX has a trailing four-quarter earnings surprise of 128.5%, on average.

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