Mondelez's Q4 Beat Masks Deeper Cost and Volume Challenges

What happened

Mondelez International reported Q4 2025 earnings and revenue that exceeded analyst estimates, driven by effective pricing strategies and cost discipline. This performance comes amidst severe cocoa inflation and broader input cost pressures that have compressed margins throughout 2025, as detailed in recent filings. Despite the beat, volume/mix remains negative globally, with consumer elasticity high in key regions like North America and Europe, indicating persistent demand weakness. The company's ability to sustain earnings growth hinges on cocoa cost deflation and volume stabilization, both of which face uncertainty from tariffs and other structural headwinds. While Q4 results show short-term resilience, they do not signal a fundamental turnaround given the ongoing margin and volume pressures.

Implication

The Q4 beat demonstrates Mondelez's ability to leverage pricing and cost control temporarily, but it fails to address the underlying volume declines that have plagued 2025. With cocoa futures having halved, some margin relief is expected in 2026, but other input costs, tariffs, and high elasticity could offset gains, limiting EPS growth. Investors must scrutinize the upcoming FY 2025 results and 2026 guidance for evidence of a credible path to high-single-digit EPS growth and volume stabilization. If volume/mix remains worse than -2% and gross margin recovery is sluggish, the current valuation at 19.8x depressed earnings may not be justified. Therefore, maintaining a 'wait' stance is prudent until clearer signs of sustained operational repair emerge, aligning with the DeepValue report's cautious outlook.

Thesis delta

The news reinforces the existing 'WAIT' thesis by highlighting temporary earnings resilience amid ongoing cocoa and volume headwinds, without altering the core uncertainty. No significant shift is indicated; instead, it underscores the need for confirmation in future guidance, particularly around margin improvement and volume trends. Investors should await the 2026 guidance for a clearer assessment before considering any change to the investment call.