Morgan Stanley Upgrades Mondelez On Improved Top-Line Growth Outlook

Despite having appreciated by around 21% over the past year, Mondelez International Inc’s MDLZ stock offers “a compelling opportunity,” given the company’s positive strategy changes, pending reinvestment and favorable geographic and category growth footprint, according to Morgan Stanley.

The Analyst

Morgan Stanley’s Dara Mohsenian upgraded Mondelez from Equal-Weight to Overweight, leaving the price target unchanged at $62.

The Thesis

Mondelez's stock continues to trade at a significant discount to its multinational large-cap peers, despite the company generating similar topline and EPS growth, Mohsenian said in the note.

Mohsenian mentioned six factors that support his optimism around the company achieving sustainable topline growth of around 3.5%.

1. Mondelez's favorable geo-weighted category growth has consistently been in the range of low-to-mid single-digit percent.
2. The company has made strategic changes to focus on topline growth and invested greater efforts on local brands.
3. 'The analyst said Mondelez's volume trends in emerging markets have improved.
4. The company’s improving market share trends, backed by higher investment in its brands.
5. Growth in the global snacking category has accelerated to 3-3.5%.
6. Mohsenian also cited acceleration in the company’s topline growth in the U.S. market.

He added that the company planned to increase reinvestment in the back half of the year to around $100 million, from $50 million in the first half.

The Analyst

Shares of Mondelez rose 2% to $54.59 at time of publishing on Thursday.

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