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TheStreet Open House

Peltz Won't Push for a Deal Between Mondelez (MDLZ) and Pepsi (PEP)

NEW YORK (TheStreet) -- Activist investor Nelson Peltz will no longer push for a deal between Mondelez (MDLZ) and PepsiCo  (PEP)Mondelez shares fell 2.6% to $34.34 on Tuesday. Shares of PepsiCo rose 0.4% to $82.53.

Peltz, now a member of the Mondelez board, once pushed for a merger of the maker of cookies such as Oreo and Chips Ahoy and the Frito-Lay business of PepsiCo. A Peltz spokeswoman told The Associated Press that Pepsi wasn't interested in a deal.

In a recent note to investors, JPMorgan analyst Ken Goldman said Peltz joining the Mondelez board is a way for the snack producer to avoid a proxy fight. Such a proxy vote could have seen CEO Irene Rosenfield and other board members "voted off the island" because of the company's recent disappointing performance, the analyst said.

Mondelez was once part of Kraft (KRFT), but split from the food giant to focus more on snack foods.

TheStreet Ratings team rates MONDELEZ INTERNATIONAL INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MONDELEZ INTERNATIONAL INC (MDLZ) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MDLZ's revenue growth has slightly outpaced the industry average of 0.0%. Since the same quarter one year prior, revenues slightly increased by 1.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 57.0% when compared to the same quarter one year prior, rising from $652.00 million to $1,024.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that MDLZ's debt-to-equity ratio is low, the quick ratio, which is currently 0.65, displays a potential problem in covering short-term cash needs.
  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 28.32%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • MONDELEZ INTERNATIONAL INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MONDELEZ INTERNATIONAL INC reported lower earnings of $0.87 versus $1.99 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus $0.87).

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