Morgan Stanley Reviews Mondelez Earnings

In a report published Thursday, Morgan Stanley analysts maintained an Overweight rating on

, with a price target of $42, after the company reported robust 1Q results. The company's underlying results in 1Q were strong, suggesting "potential for upside to initial guidance." Mondelez reported its Q1 EPS at $0.41, beating the Morgan Stanley and consensus estimates on the back of strong org sales (represending 3.8 percent growth) and EBIT margin expansion (+160 bps y/y). The company's EBIT margin, at 13.8 percent, was ahead of expectation, reflecting healthy gross margin expansion, boosted by higher pricing and net productivity. "Results benefited from earlier than expected cost savings from its supply chain/overhead initiatives, with strength in NA (+400 bps YoY) and Europe (+180 bps YoY), and give us increased confidence in MDLZ's 14% EBIT margin target in 2015," Morgan Stanley noted in the report. The analysts believe that there are "several potential catalysts through the balance of 2015" and that the company may revisits its 2015 outlook in Q2 "to reflect the coffee JV formation and use of related proceeds for accelerated share repurchases." Moreover, the realignment of the European business into separate Snacking and Cheese/Grocery units "could be a step towards evaluating strategic alternatives," the analysts added.