Mondelez CEO keeps it real on inflation as earnings trounce estimates

The climb keeps getting steeper for the Oreo maker.

"The inflationary environment is not easing at all," Mondelez chairman and CEO Dirk Van de Put said on Yahoo Finance on Tuesday after reporting better-than-expected first quarter profits.

Though input costs for many goods are normalizing, as Coca-Cola's CEO told Yahoo Finance earlier Tuesday, Mondelez has been hit with higher prices for particular raw materials such as cocoa.

The rising costs put the company in the unenviable position of pushing through more price increases on shoppers. Van de Put says the company may be forced to keep raising prices in 2024 to counteract inflationary forces.

Van de Put — whose company churns out Oreo cookies and Ritz crackers — says low-income consumers have started to push back on the higher prices.

That led to Mondelez taking a "cautious" approach to its full-year guidance today by simply reiterating its top- and bottom-line outlooks, per Van de Put.

"So we expect Street estimates for this year and next to drop (though maybe not enough for 2025 — we’ll see), and we acknowledge that there is relatively limited upside to our price target at the moment," warned JPMorgan analyst Ken Goldman in a client note on Wednesday.

The earnings rundown

• Net sales: up 1.4% year over year to $9.3 billion vs. estimates for $8.6 billion

  • Organic sales: Up 4.2% year over year

• Adjusted gross profit margins: 39.2% vs. 36.8% a year ago

• Adjusted diluted earnings per share: Up 10.5% from the prior year to $0.95 vs. estimates for $0.83

What else stood out to us

• The consumer pushback: Mondelez saw organic volume declines in all geographic regions as it pushed through price increases across the board.

• Where the price increases are: Emerging market pricing rose 8.2% in the quarter, compared to a 5% increase in developed markets.

• Big bite on buybacks: With its stock price down slightly on the year, Mondelez used the opportunity to buy back $568 million in stock in Q1. A year ago, it repurchased $399 million in stock.

• Unchanged full-year outlook: Despite the better-than-expected start to the year, Mondelez still expected organic sales growth of 3% to 5% and high-single-digit-percentage adjusted EPS growth.

Key problem for shoppers: Inflation

Inflation has been a thorn in the side of consumers ever since the pandemic, and it remains a problem that's impacting shopping baskets. The Consumer Price Index (CPI) increased by 0.4% sequentially in March and 3.5% year over year. That marked an acceleration from the 3.2% annualized increase in February.

In part, consumer inflation is being fueled by big food companies passing along their own higher input costs. For example, in the first quarter, Coca-Cola's (KO) price mix increased by 13%, while Molson Coors (TAP) reported a 4.4% increase in price mix.

Inflation is likely to stay "sticky" in the near term, which will complicate future moves on interest rates, Deutsche Bank chief US economist Matthew Luzzetti said on a new episode of the Opening Bid podcast (listen below).

Catch all Opening Bid episodes on Yahoo Finance, YouTube, and Spotify.

Brian Sozzi is Yahoo Finance's Executive Editor. He is also the host of the "Opening Bid" podcast. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to come on Yahoo Finance Live? Email Brian Sozzi.

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