MONDELEZ INTERNATIONAL (MDLZ:NASDAQ) $77.86

Gain to date: 23.2%

Shares in snacking giant Mondelez International (MDLZ:NASDAQ) are up more than 23% since we urged readers to buy at $63.22 on 10 November last year, with the stock testing fresh all-time highs. Investors evidently have a strong appetite for exposure to the earnings and cash flows generated by Mondelez’s iconic portfolio of brands including Oreo, Cadbury Dairy Milk, Toblerone, belVita breakfast biscuits and Ritz crackers.

These products are demonstrably resilient and enjoy high levels of loyalty from consumers who should continue to spend on tasty snacks that provide a bit of succour during straitened
economic times.

WHAT’S HAPPENED SINCE WE SAID TO BUY?

Since we highlighted Mondelez’s attractions, the company has agreed to sell its gum business in developed markets – including brands such as Trident and Dentyne – to Perfetti Van Melle for $1.35 billion, and served up solid full year and fourth quarter results in January, with organic sales up 15.4% in Q4.

More recent first quarter results (27 April) showed a strong start to the year with organic sales growth accelerating to a forecast-beating 19.4% thanks to price increases to offset cost inflation combined with volume growth, with the company’s 2022 acquisitions Clif Bar and Ricolino helping fatten up the top line.

In confident mood, management also raised both its organic sales growth and adjusted earnings per share guidance for the year to 10%-plus. Chairman and CEO Dirk Van de Put insisted his charge saw ‘broad-based demand across both developed and emerging markets’ in the first quarter, as consumers around the world ‘continue to prioritise our chocolate, biscuits, and baked snacks categories and brands’.

WHAT SHOULD INVESTORS DO NOW?

While the shares aren’t cheap on 24.5 times estimated 2023 earnings, risk-averse investors concerned about a global recession should stick with this high-quality business. Shares believes Mondelez, whose fans include noted fund manager Nick Train, should continue to grow sales and earnings during tougher economic times, while Mondelez is returning copious amounts of capital to shareholders through dividends and share buybacks. 

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