Will Mondelez Miss?

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Mondelez International Inc MDLZis set to report fourth-quarter and full-year 2014 results on Feb 11. Last quarter, the company delivered a positive earnings surprise of 28.21%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Mondelez has been reporting weak top-line results ever since it split from Kraft Foods Group, Inc. KRFT in Oct 2012 due to snacking category weakness. In the first nine months of 2014, the company trailed category growth, recording organic growth of just over 2%, much less than overall category growth of 3.5%.

In fact, Mondelez lowered its sales outlook twice in 2014 to reflect slower global food category growth. The category growth is not expected to improve in the near term while the retail and consumer environment remain challenging. Moreover, therecent weakening of many currencies against the U.S. dollar can pull down Mondelez's sales profits in the to-be-reported quarter due to its significant international presence.

Moreover, input costs rose sharply in 2014, especially dairy and cocoa, requiring management to take significant pricing action, especially in chocolate. However, its competitors were slow in increasing prices which resulted in volume and market share losses and pricing-related retailer customer disputes in several markets (mainly France) in the second and third quarters. These issues are expected to continue to hurt sales and volumes in the fourth quarter as well.

However, despite the top-line weakness, the company has been consistently improving margins through cost management and productivity gains. In fact, the company raised the full-year profit outlook concurrent with the third-quarter results following three consecutive quarters of double-digit earnings growth.

Earnings Whispers

Our proven model does not conclusively show that Mondelez is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is 0.00% as both the Most Accurate estimate and Zacks Consensus Estimate stand at 43 cents.

Zacks Rank: Mondelez has a Zacks Rank #4 (Sell).

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some food stocks that have both a positive Earnings ESP and a favorable Zacks Rank:

SUPERVALU, Inc. SVU, with an Earnings ESP of +4.76% and a Zacks Rank #2 (Buy).

The J. M. Smucker Company SJM, with an Earnings ESP of +1.33% and a Zacks Rank #3 (Hold).