Check Out Bernstein's Massive Mondelez Bull Thesis

• The share price of Mondelez International Inc (NASDAQ: 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 could lead to an inflection in the company’s top and bottom lines, and she continues to rate the stock as a top pick in U.S. goods 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. (NYSE: PEP) and the possibility of an acquisition by Kraft Heinz Foods Co (NYSE: HNZ) in 2017.

Margins' Expectations

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.

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