Mondelez International, Inc. MDLZ has experienced a significant decline in its stock performance. Over the past three months, the stock has slumped 18.2%, underperforming the industry’s decline of 7%. This snack food and beverage products company has also lagged the Zacks Consumer Staples sector’s drop of 5.6% and the S&P 500's growth of 11.3% in the same time frame.

MDLZ 3-Month Price Performance vs. Industry, Sector & S&P 500

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Technical indicators are also not supportive of MDLZ’s performance. The company is trading below its 50- and 200-day moving averages, indicating potential weakness in the stock's momentum.

Despite the price dip, Mondelez remains expensive relative to its industry peers. The company’s forward 12-month price-to-earnings (P/E) ratio stands at 17.95, higher than the industry average of 15.76. This premium valuation reflects expectations for robust growth but also raises concerns about whether Mondelez can meet these high expectations, especially amid current headwinds.

MDLZ Stock Looks Overvalued

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Obstacles to Mondelez’s Short-Term Performance

Mondelez faces hurdles in key markets, particularly in emerging regions. Organic revenue growth in these areas reached 4.9% in the third quarter of 2024, but this was accompanied by a 1% decline in volume/mix. The dip is largely attributable to consumer boycotts of Western brands in certain EMEA markets and volume weaknesses in Mexico. These trends could signal eroding pricing power or waning consumer loyalty, especially if further price hikes lead to higher elasticities.

Emerging markets, a critical driver of Mondelez’s growth, appear increasingly vulnerable. Moreover, geopolitical challenges, including ongoing boycotts of Western brands in parts of the Middle East and Southeast Asia, are likely to persist, adding to the company’s difficulties.

Soaring cocoa prices pose another challenge. These costs are expected to peak in the fourth quarter of 2024 and remain elevated into early 2025, adversely impacting the company’s profitability, particularly in the chocolate segment. Mondelez has already forecasted a year-over-year decline in fourth-quarter EPS. Such sustained cost pressures may strain margins, casting doubt on near-term earnings growth.

As a globally diversified company, Mondelez is exposed to significant currency fluctuations. Currency headwinds weighed on Mondelez’s revenues in the third quarter of 2024 and are likely to adversely impact net revenues by nearly 1.5% and adjusted EPS by around 11 cents in 2024.

Mondelez Looks Well-Positioned for the Long Term

Mondelez continues to excel in its core categories of chocolate and biscuits, underscoring its resilience. In the third quarter, the chocolate segment achieved 9.2% growth, driven by strong performance across developed and emerging markets. Meanwhile, biscuits and baked snacks grew by 3.3%, supported by a balanced mix of pricing and volume/mix gains. The company’s strategic focus on tailored packaging and diverse price points has reinforced consumer loyalty and boosted market share. With plans to derive nearly 90% of revenues from these core categories by 2030, Mondelez is well-positioned to capitalize on consumer preferences for high-quality, accessible snacks.

Mondelez has consistently enhanced its portfolio through strategic acquisitions. In September 2024, the company acquired a majority stake in Evirth, a leading cake and pastry producer in China, unlocking opportunities in a high-growth market. Past acquisitions, including Clif Bar and Chipita S.A., have  strengthened its market position.

Mondelez’s recent strategic partnership with Lotus Bakeries to co-develop new chocolate products and expand into India is a significant move to scale its business in emerging markets. This alliance aligns with Mondelez's long-term growth strategies in chocolate and biscuits. Continuous reinvestments in its brands and capabilities and impressive portfolio-reshaping efforts place Mondelez well for future growth.

Navigating MDLZ Stock: A Playbook for Investors

While Mondelez’s recent stock performance and elevated valuation relative to peers present concerns, its long-term fundamentals remain strong. The company is addressing challenges such as input cost inflation, currency volatility, and volume pressures by focusing on core categories, operational efficiency and brand innovation. Existing investors may find it prudent to hold onto their shares, while prospective investors might consider waiting for a more attractive entry point. MDLZ currently carries a Zacks Rank #3 (Hold).

Some Solid Food Stocks

Ingredion Incorporated INGR manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). INGR has a trailing four-quarter earnings surprise of 9.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.4% from the year-ago reported number.

Freshpet Inc. FRPT manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings implies growth of 27.3% and 228.6%, respectively, from the prior-year reported levels.

US Foods Holding Corp. USFD, together with its subsidiaries, engages in the marketing, sale and distribution of fresh, frozen and dry food and non-food products to foodservice customers in the United States. It currently carries a Zacks Rank #2. USFD delivered an earnings surprise of 3.7% in the last reported quarter.

The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings indicates growth of 6.4% and 18.6%, respectively, from the prior-year reported levels.

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