Option Trade
Mondelez International Inc (NASDAQ:MDLZ) Calls
Tuesday, April 28, 2015

**OPTION TRADE: Buy the MDLZ Jun 2015 39.000 call (MDLZ150619C00039000) at or under $0.35. Do not place a protective stop limit, but add pre-determined sell at $0.70.

by Ian Harvey

April 28, 2015

Introduction

Mondelez International Inc (NASDAQ: MDLZ), a snack manufacturing company -- Oreo and Cadbury maker -- will report first-quarter results before markets open on Wednesday. Analysts on average expect the company to beat both sales and profit forecasts.

Last quarter, the company delivered a positive earnings surprise of 9.30%.

In fact the consumer food company has delivered positive earnings surprises in the past four straight quarters, with an average earnings surprise of 14.56% on the back of strong margins despite a sluggish top line.

Technical Outlook

Mondelez International has a 1-year low of $31.83 and a 1-year high of $39.54. The stock’s 50-day moving average is $36.00 and its 200-day moving average is $36.40.

The company has a market cap of $60.25 billion and is trading with a trailing 12 month P/E multiple of 28.90 and an estimated forward P/E multiple of 18.63. The stock has an estimated 5 year annual growth of 8.73% and a PEG multiple of 3.31.

Mondelez International, Inc. shares are expected to touch $42.11 in the short term. This short term price target has been shared by 9 analysts. However, the standard deviation of short term price estimate has been valued at 2.76. The target price could hit $45 on the higher end and $36 on the lower end.

Earnings

Mondelez International last issued its quarterly earnings data on Wednesday, February 11th. The company reported $0.47 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.44 by $0.03. The company had revenue of $8.83 billion for the quarter, compared to the consensus estimate of $9.08 billion.

During the same quarter in the previous year, the company posted $1.00 earnings per share. The company’s revenue for the quarter was down 6.9% on a year-over-year basis. On average, analysts predict that Mondelez International will post $1.720 earnings per share for the current fiscal year.

Upcoming Report

Mondelez International has seen consistently strong margins through cost management and productivity gains. Strong margins coupled with aggressive share buybacks have allowed it to deliver solid earnings results despite a weak top line. Therefore expect the trend to continue in the first quarter as well.

In fact, management will continue to focus more on margin growth in 2015. Implementation of the Zero Based Budgeting and restructuring/overhead savings are expected to drive operating margins offsetting the rising short-term pressure from input costs and currency.

The company is also working to drive advertising cost efficiencies by consolidating media providers, reducing non-working media costs and shifting spending to lower-cost, digital media outlets which should further improve margins.

Analysts Opinions

Mondelez International was upgraded by analysts at TheStreet from a “hold” rating to a “buy” rating in a research report issued to clients and investors on Monday, 20th April.

”We rate Mondelez International Inc (MDLZ) a BUY. This is driven by a few notable strengths, 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 growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.”

A number of other research reports have been presented recently, these are as follows:-

Analysts at Canaccord Genuity reiterated a “hold” rating and set a $36.00 price target on shares of Mondelez International in a research note on Thursday, February 19th.

Analysts at Deutsche Bank reiterated a “hold” rating and set a $36.00 price target on shares of Mondelez International in a research note on Thursday, February 19th.

Finally, analysts at Zacks reiterated a “neutral” rating and set a $39.00 price target on shares of Mondelez International in a research note on Friday, February 13th.

One equities research analyst has rated the stock with a sell rating, five have given a hold rating, seven have assigned a buy rating and one has assigned a strong buy rating to the company’s stock. Mondelez International currently has a consensus rating of “Buy” and a consensus price target of $40.08.

Conclusion

Mondelez International stock is a top pick as it has a strong share of the snack manufacturing company in the emerging markets and its portfolio of brands. Mondelez currently has 44% of its revenues coming from the emerging markets and has popular brands like Oreo, Cadbury and Trident under its portfolio.

Furthermore, the inclusion of Nelson Platz to the board of directors will be beneficial to the company and the margins are likely to improve through his role. The firm forecasts that by 2016 the margins will expand to fall in the range of 15-16%. The decision of divestiture of coffee business, which the firm believes is the outcome of Nelson’s efforts, is a good decision that will create value for the shareholders.

Therefore, based on the facts above the following option trade of the week is recommended…..


**OPTION TRADE: Buy the MDLZ Jun 2015 39.000 call (MDLZ150619C00039000) at or under $0.35. Do not place a protective stop limit, but add pre-determined sell at $0.70.



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