Credit Suisse Downgrades Mondelez to Neutral from Outperform, Raises PT to $37.00

In a report published Thursday, Credit Suisse analyst Clay Crumbliss downgraded Mondelez International, Inc.

to Neutral from Outperform, raising its price target to $37.00. According to the report, the $37.00 price target is based on a 19.5x P/E multiple against our 2015 EPS estimate of $1.92. This represents an 18% premium to U.S. food companies and a 5-8% premium to global peers Nestle and Unilever. “The stock far outperformed its food peers over the past 12 months, up 30%, and is now trading at a hefty valuation premium of 23% on a P/E basis compared to U.S. food companies (see Exhibit 1) versus only 7% last year,” the report said. “That said, we think this is a good stock to hold onto over the next three years due to the strong platform in emerging markets and all of the opportunities for self-help in the supply chain. Pressure from activist investor Trian ensures that management will work aggressively to narrow the gross margin gap between Mondelez and its food peers.” The report further asserted that MDLZ has recently noticed an increase in long-horizon investors begrudgingly taking a position in this stock because of the dearth of compelling opportunities in the broader staples group. MDLZ closed Wednesday at $34.82.