Check Out Bernstein's Massive Mondelez Bull Thesis

• The share price of Mondelez International Inc MDLZ has declined 13.6 percent over the past three months, to $40.20 on January 25.
• Bernstein’s Alexia Howard has maintained an Outperform rating on the company, with a price target of $58.
• Howard believes that there are “clear catalysts” that to lead to an inflection in the company’s top and bottom lines, while continuing to rate the stock as a top pick in U.S. Good for 2016.

Analyst Alexia Howard believes that the magnitude of Mondelez’s “margin expansion and top-line improvement potential remains underappreciated by consensus and many investors. We believe that performance could pick up from here.”

Howard explained that the investment case for the stock was “three-pronged,” with potential for larger than anticipated margin expansion in the near term, a potential merger with the Food division of PepsiCo, Inc. PEP and the possibility of an acquisition by Kraft Heinz Foods Co HNZ in 2017.

In addition, Howard expects Mondelez to achieve margins of 20 percent by 2020, based on (i) rationalization of the SKU and supplier base; (ii) upgrade of its inefficient manufacturing base; (iii) reduction of headcount, and (iv) pruning of ineffective trade promotion spending.”

If Mondelez combines with Pepsico’s Food business, Howard believes that the two companies could together create a “global snacking powerhouse” with a strong market share and potential for cost synergies and robust revenue.