Citi maintains a "Buy" rating on Mondelez (MDLZ), setting a new price target of $78, down from $80, following a strong Q3 2024 performance. Mondelez's Q3 EPS exceeded expectations by $0.14, driven by a 5.4% organic sales growth and a significant gross margin beat. Despite this, the company reiterated its 2024 EPS outlook, signaling potential challenges in Q4 due to rising cocoa costs. Mondelez anticipates a y/y EPS decline in 2025, primarily due to elevated cocoa inflation and a recent $2.35 billion stock sale, which is expected to impact EPS by $0.08 before capital deployment.
Citi's revised estimates reflect increased cocoa inflation starting in Q4, with 2024 EPS adjusted to $3.47 from $3.51 and 2025 EPS to $3.41 from $3.56. The report highlights Mondelez's strategic hedging against cocoa price volatility, which could allow for lower COGS inflation if cocoa prices decrease. CFO Luca Zaramella noted, "If we see elasticities be more benign, we could bump up the pricing there, or if for that matter, we see more severe volume reaction, we could lower prices a little bit more."
Mondelez's strong performance in Europe and North America contrasts with weaker results in Latin America, particularly in Mexico. The company plans to gradually implement pricing and cost-saving measures in 2025 to combat cocoa inflation.