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Fresh Del Monte Produce Inc. Message Board

  • Emel_ Emel_ May 4, 2010 2:38 PM Flag

    How do you like dem (Pine)apples?

    Well, Fresh Del Monte finally gets some respect (at least for the day with the reversal.) Quarterly earnings today of 61 cents per share in large part due to the strength in pineapples.

    That number was below analyst expectations, but compared to the actual loss from Chiquita, it was an outstanding quarter. Plus, analysts never officially lowered earnings based on Chiquita's loss last week, so unofficially I would have to think Fresh Del Monte beat expectations. At least mine.

    So what's to like?

    Well, people are still eating (revenues beat expectations) and likely will continue to eat going forward. The previously mentioned pineapples are expected to stay very strong and continue to gain market share. The name Fresh Del Monte Gold Pineapple is the standard.

    Stock is selling at a very low p/e. Really, too low. Also the stock is still trading just barely above hard book value. (Trading well below goodwill enhanced book value.) Debt down again this quarter. Getting to the point where you can almost not even mention debt. In other words, no leverage concerns.

    Mid-East expansion is still on track.

    Plus the always fabled buyback finally was implemented this quarter. 16.4M worth.

    What's not to like?

    Part of the windfall in the other produce category will not be repeated. Unlike the pineapple gains, there were one time gains from the situation in Chile. Management said that pricing was once in a decade pricing.

    The real big problem though: the banana glut.

    Management expressly said that they don't expect the banana glut (mainly in Europe) to abate anytime soon. Unlike Chiquita, which claimed otherwise. Chiquita says they will make up all the shortfall in earnings in later quarters. FDP did not give such a promise. And I tend to believe FDP will be proven correct.

    So that means probably estimates for the year will come down since bananas are still main revenue source. Maybe $2-2.25. Although I would expect this year to be the trough year in earnings via the banana glut. And $2 for a (current) $22 stock is pretty dang good. And especially when you factor in the historic fact about cyclical companies: Always buy during the trough.

    But regardless, that means no earnings growth for this year. Something some less forward looking analysts will pooh-pooh. Although can you imagine how bad Chiquita's earnings (loss?) will be if the glut continues for the year?

    Yup, buy FDP.

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