While many consumer stocks have had a solid start to 2013,
some food providers have not been able to keep up. In particular,
Chiquita Brands International (
), despite its famous brand name and solid position in the banana
market, has been floundering.
The company has struggled with heavy competition in its vital
banana business and hasn't seen anything in terms of growth in
years. This is both on the earnings and revenue fronts,
suggesting broad weakness for the firm.
While competition and commodity prices are partly to blame,
management has made its share of mistakes as well. The company
recently went into a restructuring, and it has had trouble
righting the ship.
In fact, the stock has lost about 10% in the past year
compared to a roughly 20% gain the same time frame for the broad
consumer sector. And over longer time frames, it is even worse as
CQB has lost about 50% in the trailing two year period,
suggesting that this has been a long move lower for this troubled
This troubling trend doesn't look to be shaken anytime soon,
especially when looking at earnings estimate revisions. For the
current quarter, the consensus called for 43 cents 60 days ago
and now that figure is down to just 17 cents a share today.
The picture isn't much better for the next quarter or current
year consensus estimates either, as both of these have moved
markedly lower in the past two months. Furthermore, not a single
estimate has gone higher in the past two months, suggesting total
agreement among those following the company closest.
If that wasn't enough, CQB also has a terrible track record
when it comes to living up to expectations on earnings day. Over
the last four quarters the company has missed expectations every
time including two misses of 88% or more. If this is any guide,
the upcoming earnings announcement could also be a rough day for
For these reasons, CQB currently has a Zacks Rank of 5 or
'Strong Sell' suggesting even more weakness ahead for the
company. This is further confirmed by the Zacks Recommendation of
'Underperform' which means that both short term and long term
isn't looking good for this embattled firm.
Competition is tough in the food market, and some of
Chiquita's major rivals are seeing weakness as well. The
industry is in the bottom half in terms of Zacks Industry Ranks,
Dole Foods (
Fresh Del Monte Produce (
both have Zacks Ranks of 5 or 'Strong Sell' too.
These two companies, along with Chiquita, make up
of the global banana market, so clearly there is a negative trend
brewing in this space that most investors should stay far away
Clearly, the story for CQB isn't looking very good in the near
term, but that doesn't mean that the entire food space is facing
weakness. In fact,
Flowers Foods (
is in the same sector as CQB but it has a Zacks Rank of 1 or
While the company isn't dealing with the same foods as CQB,
the stock does look to have much more favorable earnings growth
going forward. Current estimates are looking for 44% growth this
quarter while estimates have broadly moved higher over the past
90 days, suggesting that many are growing more bullish on the
company in the near term.
So, if you are in the market for a food play, consider
avoiding the trio of big banana producers and look to the frozen
segment instead. A company like FLO is much better positioned,
and looks to be a better play than the ever-struggling Chiquita
Brands in this uncertain environment.
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CHIQUITA BR INT (CQB): Free Stock Analysis
DOLE FOOD CO (DOLE): Free Stock Analysis
FRESH DEL MONTE (FDP): Free Stock Analysis
FLOWERS FOODS (FLO): Free Stock Analysis
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