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Mondelez: Stock of the Week

How can you not like this candy maker ahead of Halloween?

Andrew Willis 24 October, 2022 | 4:28AM
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Andrew Willis: It’s surprising to see one of the sweetest stocks out there around or below its fair value estimate in the run-up to Halloween. Especially as the stock has a wide moat and a repertoire of major brands that help make for a low uncertainty rating on an investment in uncertain times.

From Cadbury to Wheat Thins and Sour Patch Kids, an array of consumer staples – or at least addictive consumer favourites - help give Mondelez (MDLZ)  a stable economic moat. But keen investors should become familiar with the makeup of this moat because the spookiest thing surrounding this stock could be the competition.

We’re talking about the likes of Nestle, Hershey and Kraft when addressing the company’s persistent competitive angst… but thankfully Mondelez appears to have an enduring edge on cost and sales. Sector director Erin Lash says the company benefits from economies of scale and mutually beneficial relationships with retailers. With such a wide array of brands, Mondelez has become an important retail partner, helping to plan sales strategies to maximize volumes and profitability, while prioritizing its brands and becoming further entrenched in a product’s supply chain.

Looking forward, we see some inflationary headwinds and supply chain disruptions, but little to change expectations of low-single-digit growth annually over the long term. Regarding margins, we think one way to improve costs would be parting ways with some unprofitable brands… although saying goodbye to a snack is usually easier said than done.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Mondelez International Inc Class A66.15 USD-0.81Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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