Mondelez's High Yield Masks Deeper Margin and Volume Concerns

What happened

Mondelez International's stock has declined to multi-year lows, pushing its dividend yield to 3.6% and attracting income-focused investors. However, the company faces severe margin compression, with adjusted gross margin dropping to 32.5% in 9M 2025 from 40.1% a year earlier due to record cocoa prices and broader input inflation. While a Seeking Alpha article touts potential earnings rebound from easing cocoa costs, the DeepValue report cautions that persistent volume declines—with global volume/mix negative across all regions—and elasticity issues in key markets like North America and Europe complicate recovery. Management has cut 2025 EPS guidance to a ~15% decline and navigates additional headwinds from U.S. tariffs and consumer down-trading, undermining hopes for a swift turnaround. As a result, the investment thesis remains in flux, with DeepValue maintaining a 'WAIT' rating until clearer evidence of margin repair and volume stabilization emerges.

Implication

The elevated dividend yield provides some income cushion but may not fully offset potential further earnings disappointments if volume trends fail to improve or cost pressures persist. Investors must closely monitor upcoming 2026 guidance for credible signs of EPS recovery linked to cocoa deflation and volume stabilization, as current valuation assumes a rebound that may not materialize. Position sizing should be conservative, given the stock's price already reflects optimism about margin repair, yet execution risks from tariffs and consumer elasticity remain high. Waiting for a lower entry price or positive catalysts, such as improved North America volumes, could enhance risk-adjusted returns over the next 6-12 months. Ultimately, success depends on management's ability to balance pricing actions with market share retention in a challenging global snacking environment.

Thesis delta

The Seeking Alpha article positions Mondelez as a bargain based on yield and cocoa cost relief, but the DeepValue analysis indicates no fundamental shift; it highlights that broader headwinds—including tariffs, volume erosion, and consumer price sensitivity—continue to threaten the anticipated recovery. Investors should therefore remain skeptical and await concrete improvements in margin and volume metrics before adjusting their outlook.