Food packaging maker
) has an impressive streak of positive quarterly earnings
surprises, which it continued earlier this month with a nearly 44%
beat in its fiscal second quarter. Meanwhile, the stock price
rocketed roughly 61% last year.
Given its flurry of earnings beats, double-digit earnings growth
projections, healthy growth in the fresh-cut produce category,
continued product innovation and synergies from an acquisition,
this Zacks Rank #1 (Strong Buy) deserves some attention from
aggressive growth investors.
Seventh Straight Beat
On January 2, Landec reported a positive earnings surprise of
43.75% for its fiscal second quarter. Adjusted earnings of 23 cents
per share comfortably beat the Zacks Consensus Estimate of 16
cents, marking the seventh consecutive positive surprise.
Revenues surged 41% year over year to $114.7 million, driven by a
strong performance from the company's fresh-cut specialty packaged
food subsidiary Apio, Inc.'s value-added business. GreenLine
Holding Company, which was acquired by Apio in April 2012,
contributed $24.3 million in revenues. Landec said that GreenLine
integration is progressing well and is ahead of its original plan.
By business lines, total revenues from Apio shot up 50% year over
year to $106.7 million, boosted by new products and gains in the
fresh-cut vegetable category. However, revenues from Lifecore
Biomedical, the company's biomaterials unit, slipped 16% to $7.7
million due to a delay in shipment and the termination of its
licensing agreement with Monsanto Company (MON).
The company raised its revenues and profit growth forecasts for
fiscal 2013. It now expects revenues to rise 33% to 38% year over
year, compared with its earlier forecast of 30%. Moreover, it sees
net income growth of 60% to 70%, up from its prior projection of
25% to 35%.
Earnings Estimates Moving Higher
Two out of three estimates have moved higher for both fiscal 2013
and fiscal 2014 over the last 7 days. As a result, the Zacks
Consensus Estimate for fiscal 2013 has gained 12% to 73 cents per
share, indicating an estimated annualized increase of roughly 50%.
For fiscal 2014, the Zacks Consensus Estimate rose 4% in 7 days to
88 cents per share, representing a projected year over year rise of
Landec is currently trading at a forward P/E of 16.45x, which is
higher than the peer group average of 14.85x. The price-to-book of
1.97x and the price-to-sales (P/S) ratio of 0.82 are also higher
than their peer group averages. However, the premium valuation is
justified given the healthy earnings trajectory.
The stock has begun to catch up with the rising earnings estimates
of late, signaling the potential for further upside.
Landec Corporation makes and distributes polymer products using its
proprietary polymer technologies for food and biomaterials markets.
The company's Apio unit is a leading provider of fresh-cut
specialty packaged vegetables in North America. Its Lifecore
subsidiary is a premium supplier of hyaluronan-based materials and
medical products for ophthalmic, orthopedic, veterinary and other
medical applications. Landec, which has a market cap of roughly
$311 million, distributes its products leveraging its dedicated
sales and marketing resources globally.
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