Just about everyone knows that the world's population is
increasing and thus global food demand is in turn on the
rise. For those of us fortunate enough, it's certainly an
area of potential profitability. As an investor, there is a
right way and a wrong way to profit from mounting food demand and
lately it seems that Fresh Del Monte Foods (
) is on the wrong end of that profit scale.
I'm sure you've heard the name, as Fresh Del Monte Produce
Inc. is a world leader in the production, distribution and
marketing of fresh produce. The DEL MONTE brand name is widely
recognized in everything from bananas and pineapples to fruits
and melons. The deciduous fruit the company sells includes
primarily grapes, plums, nectarines, peaches, apricots, cherries,
apples, pears and citrus.
Keep in mind that Fresh Del Monte Produce (FDP) is separate
from the Del Monte Company that manufactures food and pet
products under brands such as namesake Del Monte, S&W,
College Inn, Meow Mix and Kibbles 'n Bits; it was taken private
in 2011 by KKR.
Regardless of the bad news and massive restructuring,
investors are still buying the stock. The problem is that
it might not be the right choice for everyone and may take quite
a while to get all the cockroaches out.
Revenue for the last quarter fell 0.5% year over year to $776.90
million in the quarter. Analysts expected close to $800
million in revenue which would have equated to earnings of 7
cents. Instead the company reported flat earnings, a huge
GAAP EPS were -$0.01 for Q4 versus -$0.18 per share for the
prior-year quarter and seemed to add to the already bearish
earnings trajectory. The only good news seemed that margins
improved slightly. For the quarter, gross margin was 5.1%,
1.4% better than the prior-year quarter. Operating margin was
-0.1%, 2.5% better than the prior-year quarter. Net margin was
0.0%, 1.3% better than the prior-year quarter.
After the report, there have been several downgrades to the
stock and we have seen the Zacks Consensus drop for all reporting
periods. Analysts are now looking for growth of -19% for FY2013,
but a recovery of almost 20% growth in FY2014.
Shares resilient despite financial woes
What's interesting is that shares have held their bullish trend
through all this mess. Even as losses were mounting and
sales lacking any momentum, the stock is remarkably still in a
somewhat bullish trend. A breakdown below the $26.75 level
could spell a short term technical meltdown for FDP, so watch
that level closely.
Perhaps the forward p/e of 13.08 is attracting investors for
the long term, but with its recent earnings growth history (or
lack thereof), global economic uncertainly and competition, Fresh
Del Monte might be a stock you should substitute for a agri-stock
in a slight different space with a better Zacks Rank and
CF Industries (
), a Zacks Rank #3 stock or CVR Partners (
), a Zacks Rank #1, might be a couple to look at as
In the meantime, FDP analysts are not expecting much when they
report earnings on May 7 th . Zacks Consensus Expectations are
for earnings of 94 cents, but I suspect they will come down from
that level just ahead of the report.
Jared A Levy is one of the most highly sought after traders in
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CF INDUS HLDGS (CF): Free Stock Analysis
FRESH DEL MONTE (FDP): Free Stock Analysis
CVR PARTNERS LP (UAN): Free Stock Analysis
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