Mondelez Stock Tumbles. Oreo Maker Saw Slower Growth as Consumers Dial Back Spending.

Adjusted earnings per share came at 84 cents for the quarter, 23.5% more than the year-ago period, topping analysts expectation of 78 cents.

While both earnings and sales look solid, investors took the latest report as a downbeat signal. Mondelez shares tumbled 3.6% on Wednesday morning after it reported earnings after Tuesday’s market close.  

Although Mondelez was able to command higher prices amid inflation, consumers are reconsidering before picking up that pack of Oreo at grocery stores.

Organic net revenue growth came in at 9.8%. While higher prices of its product mix contributed 10.2 percentage points to the growth, sales volume dropped, dragging the number down by 0.4 percentage points. In North America particularly, sales volume fell by 5.5% from the year ago period.

For much of 2023, although product prices rose sharply amid heated inflation, consumer demand remained strong as people continued to munch on their favorite snacks.

In the first three quarters of the year, Mondelez posted 17% top-line sales growth. While the price mix of its product shot up 14.6%, sales volume grew 2.4% across all segments.

That resilience seems to have cracked in the latest quarter, more pressure might lie ahead. Commodity prices in cocoa, sugar, and butter continue to rise as abnormal weather patterns and supply-chain issues disrupt global output.

At the earnings call on Tuesday, Mondelez management said it expects high single-digit price hikes in 2024, mostly driven by significant increase in cocoa prices that have reached a four-decade high of more than $4,700 per metric ton.

Still, Mondelez executives expect sales volume growth to come back to the positive territory in 2024.

Tensions in the Middle East have dragged on sales in the region. Mondelez expects it to continue in the first half of 2024, but believes the impact will gradually fade away. 

As for the U.S. market, the integration of new acquisitions like Clif Bar have affected sales volume, while the company stopped selling certain products due to lower margins.

“It is really a one-off situation in Q4,” says CEO Dirk Van de Put on the earnings call, “We don’t really necessarily feel like there is a slowdown in North America.” 

For fiscal 2024, management expects to see 3% to 5% organic net revenue growth, excluding the impact of foreign exchange. That’s lower than the 6% growth expected by analysts polled by FactSet.

Adjusted earnings-per-share are expected to grow by high single digit in 2024 on a constant currency basis.

Food stocks were hit hard during the summer as investors became worried that a new class of weight-loss medications like Ozempic and Wegovy could drastically reduce consumers’ calorie consumption and hurt the food business. From Sep. 14 to Oct. 12, Mondelez shares tumbled 16% along with many of its peers.

But the stocks soon recovered as many executives at food and drug companies, as well as Wall Street analysts, claim that the fear is overblown. Bank of America analysts estimated that if 25 million to 50 million of Americans take the drugs by 2030, the total calorie consumption of the nation could be reduced by 1% to 3%. 

The impact on Mondelez could be even smaller. Only one third of the food giant’s sales is generated in North America, which means the company is less exposed to the obese consumers here. The company also offers a range of healthier options like Clif Bars that some consumers might turn to in their weight-loss journeys. 

“Tracked channel trends indicate a deceleration in the U.S., but we believe any domestic weakness can be offset by continued strength in emerging markets,” wrote Nik Modi, an analyst at RBC Capital in a research note last week.

Write to Evie Liu at evie.liu@barrons.com