Piper Sandler has adjusted its outlook on Mondelez (NASDAQ:MDLZ) International (NASDAQ:MDLZ), reducing the price target from $78.00 to $76.00 while maintaining an Overweight rating on the stock.
The revision comes as the firm addresses the ongoing challenges in the cocoa market, which is a key ingredient for the company's products.
The analyst from Piper Sandler noted that Mondelez provided insight into its second-quarter financials, indicating little change expected until September when there is more visibility on the cocoa crop.
This prompted a reassessment of the company's financial outlook. The firm had previously anticipated a gradual decrease in futures costs for cocoa, but now expects these elevated costs to persist for a longer period before declining more sharply.
Despite the changes in cocoa cost expectations, the overall impact on Mondelez's financial projections is minimal. However, adjustments were made to the company's expected tax rate and pricing strategies in the European Union.
The projected tax rate was revised to approximately 25.0%, up from the prior estimate of 23.5%. Additionally, the anticipated pricing growth in the EU for 2025 was adjusted to around 6.5%, down from the earlier forecast of approximately 10.0%.
As a result of these updates, Piper Sandler has lowered its earnings per share (EPS) estimates for Mondelez. The 2024 EPS estimate was slightly reduced from $3.58 to $3.57, and the 2025 EPS forecast saw a more significant revision from $3.71 to $3.57.
This change reflects the combined impact of the updated tax rate and EU pricing expectations, each contributing a $0.07 reduction in the EPS projections.
Mondelez International reported a strong financial performance with solid profit growth and $1.5 billion in free cash flow. The company witnessed revenue growth in emerging markets and its core categories of chocolate, biscuits, and baked snacks, despite volume mix decline in developed markets.
Piper Sandler has maintained an Overweight rating on Mondelez shares and increased its price target to $78.00, following the company's better than expected second quarter 2024 earnings per share (EPS) and a slight increase in its revenue guidance for the year.
DA Davidson also maintained a Buy rating, although it adjusted its price target for Mondelez to $75 from $80 due to market challenges. Both Piper Sandler and DA Davidson anticipate Mondelez to move past recent disruptions and achieve its raised revenue targets.
Mondelez's strategic partnerships with Lotus Bakeries and BISCOFF were announced to co-brand chocolate products and expand the biscuit business in India, despite anticipating challenges from rising cocoa costs.
InvestingPro Insights
In light of Piper Sandler's recent revision of Mondelez International's price target, current InvestingPro data provides additional context for investors. Mondelez's adjusted market capitalization stands at $92.25 billion, indicating its significant presence in the market. The company's adjusted P/E ratio for the last twelve months as of Q2 2024 is 19.4, which is a more favorable figure compared to the current P/E ratio of 23.83, suggesting the company's earnings may be undervalued relative to its share price.
InvestingPro Tips highlight the company's solid revenue growth of 5.41% in the last twelve months as of Q2 2024, which may reassure investors of Mondelez's ability to expand its business. Furthermore, the company's dividend yield as of 2024 stands at 2.68%, coupled with a substantial dividend growth rate of 22.08% in the last twelve months as of Q2 2024, reflecting Mondelez's commitment to returning value to shareholders.
For those interested in further analysis, InvestingPro offers additional tips on Mondelez International, providing a deeper dive into the company's financial health and market performance. Currently, there are 15+ additional InvestingPro Tips available, which could be invaluable for investors seeking to make an informed decision on the stock.
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