Mondelez (MDLZ): What Cocoa Does to Margins and the 3.3% Yield
Net income at Mondelez fell from $4.6 billion to $2.5 billion in the last fiscal year while revenue rose 6 percent to $38.5 billion. Sales up, profit almost cut in half. Anyone who owns a chocolate maker will guess the reason within a second, and the guess is cocoa, but I want to be careful about how much of that story the numbers can actually prove.
The stock trades around $60.85 as I write this, 8.7% below its 52-week high of $67, with a dividend yield of 3.29%. My view is that Mondelez is a decent business with a real commodity problem that is easing slowly, and that the yield is safe only if earnings keep recovering. I would not call it cheap. It looks fairly priced for a company still proving that margins are coming back.
Where cocoa enters the business
Mondelez sells Oreo and Ritz crackers next to Cadbury and Milka chocolate. A chocolate bar is mostly cocoa plus sugar and milk, so the company has more raw-material exposure than the “snack stock” label suggests. Biscuits lean on wheat and edible oils. Gum and candy use sugar. Little of the range is spared from commodity swings.
I dropped the segment percentages that older versions of this post quoted, because I could not confirm them. I would rather give you fewer numbers than stale ones. The picture without them is still clear. Chocolate is a large slice of sales and biscuits are the largest slice; cocoa touches the first and some of the second.
Cocoa prices ran up sharply in recent years and have since moderated. The catch, which I only understood after reading the company’s second-quarter 2026 release, is that Mondelez buys ahead. In that report the company said hedge positions still reflect previously contracted prices, so the relief from cheaper cocoa arrives late. According to the same coverage, adjusted gross margin rose 20 basis points to 34 percent in the quarter, helped by higher net pricing, with higher raw material costs a partial offset. I found those figures in summaries of the release on the company’s investor site and in the June 2026 10-Q on SEC EDGAR; anyone relying on them should read the release itself.
What revenue and profit show
Revenue for 2025 was $38.5 billion, up from $36.4 billion in 2024 and $31.5 billion in 2022. That is 22 percent growth over three years, and I suspect a good part of it is price, since food makers raised prices to cover input costs. I cannot split price from volume with my data. The latest quarter brought in $9.4 billion, 4 percent above a year earlier and 7 percent below the previous quarter, which is a normal seasonal step down after a big chocolate season.
Profit tells a different story. Operating income was $3.6 billion, a 9 percent margin. Net income was $2.5 billion, a 6 percent margin. The year before, net income was $4.6 billion. My data also shows gross margin at 28.4 percent against 39.1 percent the year before. That gap of 10.7 points is too large to be raw cost alone, and it does not match the 34 percent adjusted figure the company gave for the second quarter. Definitions, hedge accounting and one-time items could each play a part; I cannot separate them from the data I have. I read it as a sign that reported earnings are noisier than the underlying business, and that is the main reason I would not put weight on any single year.
Here is why margin matters so much. One point of gross margin on $38.5 billion of sales is about $385 million before tax. With roughly 1.28 billion shares outstanding (market value of $77.7 billion divided by the share price), that is about 30 cents a share. Trailing earnings are $2.73, so a swing of a few points either way is the difference between a good year and a bad one. Cocoa does not need to move much to matter.
What the price asks for
At 22.3 times trailing earnings, Mondelez sits slightly below its own five-year average of 23.8. On forward earnings of $3.05 the multiple is 20.0. That forward figure assumes earnings per share rise about 12 percent from the trailing $2.73, which is a healthy recovery and not a heroic one. Price to sales is 2.0 against a five-year average of 2.6, so the market is paying a little less per dollar of revenue than usual. That fits a business whose sales have grown but whose margins have not caught up.
I would call that fair. A 20-times forward multiple for a global food company is not a bargain. The discount to the past shows up because profit margins are lower than they used to be, and if margins recover, the discount should narrow. If they do not, the stock is about where it should be. I made a related point about what a given P/E requires in my reverse-DCF piece: the multiple is a claim about future earnings, and it is only cheap if the claim is likely to be met.
| Metric | Value | Context |
|---|---|---|
| Share price | $60.85 | 52-week range $50 to $67 |
| P/E (trailing) | 22.3 | five-year average 23.8 |
| P/E (forward) | 20.0 | based on $3.05 expected EPS |
| Price to sales | 2.0 | five-year average 2.6 |
| Revenue, 2025 | $38.5 billion | $31.5 billion in 2022 |
| Net income, 2025 | $2.5 billion | $4.6 billion the year before |
| Dividend yield | 3.29% | $2.00 a share over 12 months |
| Analyst target | $71 | 16% above price; range $66 to $74 |
Can the dividend hold
The dividend over the last twelve months was $2.00 a share. At $60.85 that is a yield of 3.29%, which is why income investors look here. Against trailing earnings of $2.73 the payout is about 73 percent. That is on the high side for a company whose profit can swing by tens of percent.
Look at it a second way. Two dollars a share on about 1.28 billion shares is roughly $2.55 billion a year in dividends. Fiscal 2025 net income was $2.5 billion. In that year, the dividend consumed essentially all of the earnings, which is not a comfortable position. Cash flow can differ from net income and I have not checked it, so I do not call the payment endangered today. A second weak year would force a choice between the dividend and everything else the company spends on. I explained that kind of trade-off for a different type of holder in my note on what makes an income stock durable.
If earnings reach the forward estimate of $3.05, the payout drops to about 66 percent, and the yield looks more secure. That is the outcome I expect, but it is a forecast. It depends on cocoa cost relief arriving before price increases run out of steam.
How the market has judged the reports
Analysts are mostly positive. Of 15 covering the stock, 80% rate it a buy, and the average target of $71 implies 16% upside. Even the lowest target, $66, sits 8 percent above today’s price. I discount that a bit. When every target is above the price, it usually means the estimates are stale or the group is anchored to one story, and here the story is margin recovery.
Earnings-day moves have been ordinary. The average move around reports is 3.1%, and after the July 28 report the stock rose +4.0%. Short interest is 2.5% of shares, which is low, so there is no crowded bet against the company. A consumer-staples name that jumps 4 percent on a report is telling you the market was worried and got relief, not that it has changed its mind about the long-term picture.
What would prove me wrong
My argument depends on cocoa costs feeding through slowly into lower expenses and on prices staying firm. Here is how it fails, and it is worth spelling out. If consumers start trading down to store-brand chocolate, Mondelez would face a choice between cutting price and losing volume, and the revenue growth I relied on would fade. Then margin recovery has nothing to build on. A second way I could be wrong is hedging: if the company locked in high-priced cocoa for longer than I assume, the benefit of lower spot prices could be delayed into 2027, and the forward EPS estimate would look too high.
I also cannot see how much of the 2025 profit drop was one-time. That uncertainty matters, because if most of it was one-off, the true earning power is higher than my numbers suggest and the stock is cheaper than I think. Analysts who see the detailed reconciliation may be right to be more optimistic than I am. I would rather say so than pretend to know.
What I would check next
The next quarterly report is the test. I would want gross margin, on the company’s own adjusted basis, at 34 percent or higher for a second quarter in a row. I would also want reported EPS to run at least at the $3.05 annual pace. If both happen, the payout falls toward the mid-60s and the multiple is fair for a steady compounder. If adjusted gross margin slips back below 33 percent while cocoa is cheaper, the pricing power argument is weaker than I think. I would then need the stock nearer $55, about 10 percent lower, to be interested. At $60.85, a holder is paid a 3.29% yield to wait and watch, and that is about the fair terms.
Analysis and opinion only, not investment advice. Figures come from Mondelez’s filings on SEC EDGAR and its investor site; valuation multiples are approximate and were checked on September 22, 2026.