The Best Food Company, Not Who You Think: Mondelez International Inc (MDLZ), Campbell Soup Company (CPB)

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Mondelez International Inc (NASDAQ:MDLZ) is quite the dividend and growth combo stock, and is better positioned than the other major food stocks with its robust international exposure  The stock pays a dividend yield of 1.8% and could be undervalued by as much as 15%. Mondelez is the result of a 2012 division of Kraft Foods; Mondelez makes up the global snacks company, and the spinoff, Kraft Foods Group, is the North American grocery segment.

Mondelez (MDLZ)

Mondelez reported fourth quarter and full year 2012 results that reflected solid organic revenue growth, and higher gross and operating margins. Organic revenues increased 4.4% year over year, while power brands, including Oreo and Cadbury, grew at nearly double the company rate at 8.1%. Mondelez International Inc (NASDAQ:MDLZ) is still reaping the benefits of its 2010 Cadbury acquisition, where Cadbury has given Mondelez access to distribution networks in India, Brazil and Mexico, and is estimated to have saved the company $800 million in 2012, with similar savings expectations for future years.

Mondelez has robust opportunities internationally, and has experienced better-than-peer performance in Europe. Sales and operating profit in Europe were up year over year for the first half of 2011 and 2012, and are on pace to be up again in 2013. Over 80% of sales are from outside of North America and the company is also looking to get even more exposure to emerging markets. Mondelez International Inc (NASDAQ:MDLZ) believes that developing markets (Latin America, Asia, and Central & Eastern Europe) will represent about 45% of 2013 revenue, and Western Europe will account for 35%.

Based on Mondelez’s below average 1.3 times price to sales ratio, the stock could well be considered undervalued.  Putting the peer average 1.6 times P/S ratio on analysts’ 2013 sales estimates, and Mondelez’s intrinsic value suggests the stock should trade above $33, an upside of over 15%.
Avoid the competition
General Mills, Inc. (NYSE:GIS) made a big bet with its 2011 Yoplait Yogurt acquisition, but the segment has remained under pressure, with dairy cost inflation leading to lower sales volume. However, the company still trades at multi-year highs. The key hindrance to General Mills is its lack of an international presence, with only 12% of 2012 sales coming form international markets. What’s more is that its U.S. retail segment has been performing poorly. The segment showed sales growth of only 2% year over year last quarter. However, with a beta of only 0.2, General Mills is also not a volatile stock (see more safe stocks here).
Kellogg Company (NYSE:K) has a lot of exposure to its legacy cereal business, which has been sluggish of late. Its U.S. cereal business has grown in the low single digits over the past few quarters; meanwhile, Kellogg’s European segment is also seeing weakness, with both sales and operating profits declining last quarter as the countries of that continent continue to face a sluggish economy. Also, where Mondelez is excelling internationally, Kellogg’s international operating profit was down 22% and organic operating profit for Asia-Pacific was down 70% last quarter.
Campbell Soup Company (NYSE:CPB) is been looking to hedge its high-sodium products with its Bolthouse Farms acquisition in 2012, which is a manufacturer of healthy food products. The acquisition gives Campbell access to a $12 billion packaged “fresh” foods market. During the second half of Campbell’s fiscal 2013, Bolthouse contributed 8% to total sales and 2% to operating income. However, Campbell Soup Company (NYSE:CPB)’s international simple meals segment was up only 1% year over year last quarter (read more about Campbell’s turnaround).
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