Bank of America is sweet on Mondelez’s new focus on chocolate, biscuits
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Mondelezâs (NASDAQ:MDLZ) moves to streamline its business are a boon to investors, according to Bank of America analyst Bryan Spillane.

The company indicated on Tuesday that it plans to focus on baked goods, chocolate, and biscuits moving forward, projecting a 90-10 split between chocolate and biscuits for revenue moving forward. To do so, the company plans to divest its developed market gum and Halls cough drops businesses that make up about 3.5% of sales. 

âMDLZâs ability to focus on Chocolate and Biscuits is a meaningful sign of how far the company has grown in creating a healthier revenue base, increased scale and margins,â Spillane said of the plan. âRecall, when [Mondelez] (MDLZ) split from Kraft (KHC) in 2012 it needed the revenues and cash flow from non-core businesses in order to have scale in certain countries in addition to cash flow. That is largely not the case anymore.â

He noted that the companyâs exposure to attractive and up-and-coming markets, strong cash flow generation, and appetite to engage in M&A make it worthy of a premium valuation in relation to its peers. In the near-term, a sale of the businesses slated for divestment could also spark a rally for the stock.

âBottom line; [Mondelez] (MDLZ) continues to expect to compound âlow double digitâ total shareholder returns driven by high single digit earnings growth and rising dividends,â Spillane concluded. âAt this point headwinds are already baked into [full year 2022] expectationsâ¦and there seems to be a path for [Mondelez] (MDLZ) to resume compounding double digit total shareholder returns in the years ahead.â

He maintained his âOutperformâ rating and assigned a $75 price target to the stock.
Read more on the companyâs long-term targets.