-- Mondelez International (MDLZ) is facing challenges in developed markets and an increasing threat to demand from the Middle East conflict, leading to a more cautious near-term outlook, RBC Capital Markets said Friday in a preview of the company's Q1 results.
The company has "relatively high exposure" to the Middle East conflict on both input costs and top line as it sells directly in the region. Mondelez may see potential boycotts of US products in the Middle East region as well as "reduced mobility elsewhere around the world due to energy shortages," the note said.
In the US, scanner data is up 1.6% quarter to date, which is about 80 basis points better sequentially, but roughly 60 basis points worse on an underlying two-year average basis.
Cookies, the company's largest category with about 45% of US sales, are still seeing volume declines, RBC said, adding that in the US, Mondelez is also facing "significant competitive pressure" from smaller peers, especially in the bars segment.
RBC noted it is "modestly below" consensus estimates on the company's top line.
Meanwhile, commodity costs remain a challenge, though the company's approach to hedging is more sophisticated than most of its peers, and the worst may be largely behind Mondelez as cocoa prices have declined, the investment firm said.
RBC has an outperform rating on Mondelez and a $63 price target.
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