Sweet Tooth for Mondelez About to Decay
Despite its strong gains, Mondelez still sports a P/E that is higher than other food giants like Nestle
While it's true that management has delivered where it matters, I'm just not convinced that revenue growth -- organic or otherwise -- can maintain its upward trend without adversely impacting profitability. And with the bar being set so high on a stock that's far from cheap, it may only take a slight dip in Mondelez's margins to trigger a pullback.[Read: Apple, China Mobile Deal Done: Report]
Now I'm not suggesting that Mondelez, which has posted several quarters of above-average organic growth, is destined for failure. The company's recent gains seem to have fueled the Street's expectations of outperformance. But I think the "easy money" has already been made, and the time to develop a sweet tooth for this stock has passed.
Why? Consider that since Mondelez split off from Kraft's
However, in the most recent quarter, Mondelez began to experience some weakness in international markets. They achieved only a 2% year-over-year revenue increase, missing Street estimates by 1%. The revenue struggle was partly blamed on double-digit revenue declines in China, where Mondelez generates roughly $1.1 billion in annual revenue.