On Thursday, TD (TSX:TD) Cowen adjusted its outlook on Mondelez (NASDAQ:MDLZ) International, a leading confectionery and food company. The firm lowered its price target on the NASDAQ:MDLZ stock to $79 from $83, while maintaining a Buy rating. The revision reflects concerns over rising cocoa costs and potential increased price discounting in the United States.
The analyst from TD Cowen noted that the forecasted earnings per share (EPS) for fiscal years 2024 and 2025 have been reduced due to the anticipated impact of significantly higher cocoa costs expected in 2025. Additionally, there may be some heightened price discounting in the U.S. market in 2024.
According to the analyst, recent statements from Mondelez management during an investor presentation suggest a strategy to treat some of the increase in cocoa prices as "transitory." This indicates that the company may not pass the full extent of the cost inflation onto consumers.
Mondelez International's approach appears to be a strategic decision to absorb some of the higher costs associated with cocoa inflation rather than transferring them entirely to the end product pricing. This strategy could affect the company's profit margins and overall financial performance in the coming years.
The revised stock price target of $79 by TD Cowen takes into account these factors, while the Buy rating suggests that the firm still sees a positive outlook for Mondelez International's shares despite the anticipated challenges.
In other recent news, Mondelez International has seen significant developments. The company reported solid profit delivery for Q1 2024, overcoming various market disruptions to generate over $1 billion in free cash flow. Organic net revenue grew by 4.2%, driven by gains in the Chocolate and Gum & Candy sectors.
In addition, Jefferies adjusted its outlook on Mondelez, reducing the price target to $78 from the previous $83, while still recommending the stock as a Buy. The firm anticipates a significant opportunity for Mondelez in the second half of 2024 with Athleta, as the brand refocuses on performance products.
DA Davidson also adjusted its outlook on Mondelez shares, reducing the price target to $82.00 from $87.00, citing various market pressures and disruptions anticipated for fiscal year 2024. Despite these challenges, the firm maintains a Buy rating on Mondelez shares.
Moreover, Mondelez unveiled a new innovation hub in Singapore, marking an enhancement to its product development and innovation capabilities in the Asia Pacific region. This expansion is expected to drive creative development in the biscuits and baked snacks category.
These recent developments highlight the company's strategic initiatives and resilience in the face of market challenges.
InvestingPro Insights
In light of TD Cowen's recent price target adjustment for Mondelez International, current metrics from InvestingPro provide a broader financial context for potential investors. With a market capitalization of $91.66 billion, Mondelez showcases a P/E ratio that has adjusted to a more favorable 17.25 over the last twelve months as of Q1 2024, indicating a potential undervaluation compared to the current P/E ratio of 21.63. The company's revenue growth remains robust at 9.85% over the same period, which may signal a strong market position despite cost pressures.
InvestingPro Tips suggest that the company's gross profit margin of 41.69% and an operating income margin of 19.89% highlight efficient operations, which could help Mondelez navigate the challenging cost environment. Moreover, the EBITDA growth of 37.13% suggests that the company has been improving its earnings potential, which could be a positive sign for investors looking at long-term prospects.
For those considering an investment in Mondelez International, it's worth noting that the company has maintained a healthy dividend yield of 2.5%, with a dividend growth rate of 10.39% over the last twelve months, which could appeal to income-focused investors. The fair value estimates from InvestingPro stand at $78.46, closely aligned with TD Cowen's revised price target of $79, offering another perspective for valuation.
For more detailed analysis and additional insights, users can explore InvestingPro, which offers a comprehensive set of tools and data for investors. There are even more InvestingPro Tips available, which can be accessed with an exclusive offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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