BMO Upgrades Mondelez To Outperform; Notes 'Clear' Growth Trajectory

In a report published Friday, BMO Capital Markets analyst Kenneth B. Zaslow upgraded the rating on Mondelez International Inc MDLZ to Outperform, despite the company facing a challenging operating environment.

Analyst Kenneth B. Zaslow believes that Mondelez is now "a compelling investment opportunity." The company's long-term OI margins may exceed 18 percent and the path to achieving this has become clearer. Zaslow said that 2015 could mark the inflection point in the company's sales growth.

In the report BMO Capital Markets noted, "First, we believe MDLZ will drive margins by accelerating plant closings within its legacy network, implementing new “advantaged lines” across geographies, increasing overhead reductions, and expanding zero-based budgeting across geographies (e.g., emerging markets)."

Second, Zaslow expects the company's sales growth to continue to accelerate "for the next several years" reflecting:

• New management in emerging markets
• Optionality for the recovery of emerging markets
• White space opportunities, particularly in emerging markets
• Expansion of high-growth product platforms
• Competitors’ pricing following Mondelez's recent actions

Third, along with a shift in focus toward margin expansion, the company continues to focus on "unleashing shareholder value," Zaslow said. This could be done via:

• Returning cash to shareholders from non-core asset sales and operating cash flow
• Tactical acquisitions that provide needed capabilities
• Ongoing portfolio refinement