Cost Cuts and Potential Kraft-Heinz (KHC) Bid Could Be Next for Mondelez (MDLZ) - RBC

August 30, 2016 1:22 PM EDT
Get Alerts MDLZ Hot Sheet
Price: $42.61 --0%

Rating Summary:
    12 Buy, 7 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 0 | Down: 2 | New: 2
Trade MDLZ Now!
Join SI Premium – FREE

Get access to the best calls on Wall Street with's Ratings Insider Elite. Get your Free Trial here.

RBC Capital analyst David Palmer weighed in on what Mondelez's (NYSE: MDLZ) dropped bid for Hershey (NYSE: HYS) means for the company.

Palmer said while Mondelez could look for other acquisitions, they continue to believe the company will drive earnings growth through internal cost measures ahead of a potential acquisition bid by Kraft-Heinz (NYSE: KHC).

"While we cannot know for certain what motivated Mondelez to attempt this deal now, we suspect the company did believe it had somewhat of a chance to acquire one of the world's most sought after CPG assets amid a time of extraordinary pressure to create shareholder value," he commented.

He added, "Mondelez remains a significant under-earner in US Food ('16E EBIT margin 15.4% versus sector average 17.5%) and, in our view, remains the most logical next acquisition target of 3G Capital-controlled Kraft-Heinz. While global category growth has slowed modestly (baseline sales in measured channels down 0.4% in the 12 weeks ending 8/13 versus up 1.8% in the 12 weeks ending 5/21), the company still participates in growth ~2pp higher than peers amid a favorable cost environment, providing clear line of sight to differentiated long-term top- and bottom-line growth."

The firm maintained an Outperform rating and $54 price target on Mondelez.

Serious News for Serious Traders! Try Premium Free!

You May Also Be Interested In

Related Categories

Analyst Comments, Rumors

Related Entities

RBC Capital, Earnings, Definitive Agreement

Add Your Comment