Mondelez International, Inc.

MDLZ Details
 
Revenue and Earnings up Year Over Year: Mondelez International Inc (NASDAQ: MDLZ) is an American multinational confectionery, food, and beverage company, which is engaged in developing strong brands and geographic coverage over time.
 
1QFY20 Key Highlights for the Period Ended 31 March 2020: During the quarter, the company reported adjusted earnings of 69 cents per share, which increased 6.2% year over year on a reported basis and rose 10.8% on a constant-currency (cc) basis. During the quarter, the company reported net revenues of $6,707 million, which increased 2.6 % year over year, on the back of higher organic net revenues, which increased 6.4% year over year. Nonetheless, currency headwinds remain a potential headwind. In 1QFY20, revenues from emerging markets stood at $2,417 million, down 3.4% year over year on a reported basis. However, the same increased 4.5% on an organic basis. Revenues from developed markets increased 6.3% to $4,290 million, while the same increased 7.6% on an organic basis. Geographically, revenues in Latin America and Asia, Middle East & Africa fell 9.3% and 2.5% year over year, respectively. During the quarter, adjusted gross profit increased $151 million at constant currency (cc). whereas adjusted operating income increased $62 million (at cc) from the prior-year quarter’s figure. 
 

Key Highlights (Source: Company Reports)
 
Balance Sheet Highlight: The company exited the period with a cash balance of $1,925 million, while long -term debt amounted to $13,354 million and total equity of $25,752 million. At the quarter end, the company generated cash from operating activities of ~$284 million, whereas free cash flow came in at $70 million.
 
Valuation Methodology- P/CF Multiple Based Relative Valuation (Illustrative)
 
 
P/CF Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of MDLZ closed at $49.7 with a market capitalization of $70.9 billion. The stock is trading at the lower band of its 52-week trading range of $41.19 to $59.96. The stock of the company went down by 4.83% and 15.4% in the past one month and three months, respectively. The company’s strategic pricing efforts along with cost-saving initiatives are key positives. Considering the above factors, we have valued the stock using the P/CF multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). Hence, we recommend a “Buy” rating on the stock at the closing price of $49.7, up 0.85% on 22 May 2020.

 
MDLZ Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
 
 

Newell Brands Inc.

 

NWL Details
 
1QFY20 Operational Highlights for the Period Ended 31st March 2020: Reported Turnaround in Bottom-line: Newell Brands Inc. (NYSE: NWL) operates in the consumer goods segment and has a robust portfolio of well-known brands, including Paper Mate®, Sharpie®, Dymo®, EXPO®, Parker®, Elmer’s® etc.  NWL declared its 1QFY20 results, wherein the company reported net sales of $1,886 million, down 7.6% on y-o-y basis. The year-over-year decline was on the back of foreign-exchange fluctuation and weakness in core sales, which declined 5.1%. Reported gross margin expanded from 32.1% year over year and came in at 32.7%, owing to improvements in productivity and favorable pricing. The company reported an operating loss of $1.4 billion, as compared to operating income of $12 million reported in the year-ago period. The company exited the quarter with a cash balance of $476 million and long-term debt amounting to $5,375 million. During the quarter, NWL recorded operating cash flow of $23 million.
 

Income Statement Highlights (Source: Company Reports)
 
COVID-19 Update: Due to COVID-19 outbreak, the company’s 20 manufacturing and distribution centers remain closed, with those at South Deerfield, MA, and Mexicali, Mexico, closing by late March and mid-April, respectively. Out of this, the Mexicali provision has restarted operations with limited hours. Moreover, the company is witnessing sales growth in a few categories, on the back of ongoing crisis. This ever-changing dynamic has hurt sales in April and May, to some extent. The company predicts the negative trend to continue in the coming quarter and anticipates sales to reduce by ~25%. Nevertheless, it envisions to recover in the 2HFY20.
 
Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)
  
Price to Earnings based relative valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of NWL closed at $12.78 with a market capitalization of ~$5.4 billion. The stock made a 52-week low and high of $10.44 and $20.99 and is currently trading at the lower band of its 52-week trading range. The stock corrected by 33.54% in the last three months but went up by ~6.01% in the past one-month period. The Company is emphasizing on its turnaround strategy, with the goal of building a global, next generation consumer products company that can unleash the full potential of its brands in a fast moving omni-channel environment. We have valued the stock using the Price to Earnings illustrative based relative valuation method. We have considered peers like Spectrum Brands Holdings Inc (NYSE: SBP), PVH Corp (NYSE: PVH), Hasbro Inc (NYSE: HAS) and arrived at a target price of lower double-digit upside (in% terms). Hence, we recommend a ‘Buy’ rating on the stock at the closing price of $12.78, down 0.62% as on 22 May 2020.
 
 
 
NWL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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