Why Mondelez International (MDLZ) Stock Is Surging This Morning

NEW YORK (TheStreet) -- Shares of Mondelez International Inc. (MDLZ) are surging, up 8.18% to $38.10 in pre-market trade, after it was announced that Mondelez and D.E. Master Blenders will link their coffee businesses together as Mondelez concentrates increasingly on its snack foods division and cost cutting, the Associated Press reports.

The deal is part of a $3.5 billion restructuring program underway at Mondelez that is projected to create $1.5 billion in savings by 2018. 

Mondelez, which makes Oreo and Chips Ahoy cookies, Trident gum and Cadbury chocolate, split from Kraft Foods Group Inc. in late 2012, the AP noted.

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The newly formed coffee producer will sell Gevalia, Tassimo and Jacobs, which are Mondelez brands, and Senseo and Douwe Egberts from D.E. Master Blenders, formerly the Sara Lee coffee business.

The new company, with annual revenue of more than $7 billion, will be called Jacobs Douwe Egberts and it will be headquartered in the Netherlands, according to the AP.

Mondelez International Inc. had about $3.9 billion in revenue in 2013, while D.E. Master Blenders 1753 B.V. had approximately $3.4 billion.

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 some important positives, 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 compelling growth in net income, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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

  • 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 230.7% when compared to the same quarter one year prior, rising from $534.00 million to $1,766.00 million.
  • 39.09% is the gross profit margin for MONDELEZ INTERNATIONAL INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.61% is above that of the industry average.
  • Net operating cash flow has significantly increased by 198.16% to $5,212.00 million when compared to the same quarter last year. In addition, MONDELEZ INTERNATIONAL INC has also vastly surpassed the industry average cash flow growth rate of 58.43%.
  • The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that MDLZ's debt-to-equity ratio is low, the quick ratio, which is currently 0.56, displays a potential problem in covering short-term cash needs.
  • MONDELEZ INTERNATIONAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 increased its bottom line by earning $1.29 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($1.71 versus $1.29).
  • You can view the full analysis from the report here: MDLZ Ratings Report
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