Mondelez International Upgrade by RBC Capital Markets

by Warren Seah

RBC Capital Markets analysts led by Nik Modi have changed their stance on Mondelez International, the maker of Oreo cookies, as they now believe the company offers “best-in-class organic growth.” In a recent report, RBC upgraded Mondelez’s rating from Sector Perform to Outperform and raised their price target from $75 to $83. Currently, the stock is trading at $71.61 and has seen a 7.4% increase this year.

This upgrade comes after a period of gains for Mondelez stock. RBC had previously downgraded the shares on January 3rd due to concerns about valuation and volume recovery in the packaged-food industry. However, since then, the stock has gained 8.1%, closing at $71.62 on Friday. The new price target suggests a potential upside of approximately 16%.

The RBC analysts now have confidence that Mondelez will deliver outstanding top-line and margin performance, deserving a higher valuation. Currently, Mondelez stock is valued at a multiple of 20 times two-year forward price/estimated earnings. This multiple is lower than its competitors in the consumer packaged goods sector such as Procter & Gamble, Colgate-Palmolive, PepsiCo, Coca-Cola, and Church & Dwight, which trade at an average multiple of 24 times.

RBC is optimistic about Mondelez’s future outlook, highlighting its potential for category growth, share gains, expansion of its retail footprint, and increased shelf space in existing stores through an active M&A strategy.

In comparison to its competitor Hershey, Mondelez appears to have several advantages. Hershey is expected to face challenges such as rising sugar and cocoa costs and a more competitive landscape in the coming year. RBC rates Hershey stock as Sector Perform with a $213 price target. Interestingly, between RBC’s downgrade of Mondelez and the upgrade, Hershey stock has dropped by approximately 16% to $191.31.

It seems the investment community favors Mondelez over Hershey as well. According to a FactSet survey, 88% of analysts covering Mondelez rate the stock as a Buy, whereas only 36% of analysts have assigned a Buy rating to Hershey.

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