Sector Snap: Produce stocks gain on banana outlook

Chiquita, Fresh Del Monte shares gain as analyst cites improved outlook for bananas

Associated Press

NEW YORK (AP) -- Shares of Chiquita Brands and Fresh Del Monte Produce rose Wednesday after an analyst raised her rating on the companies to "Buy," noting the improved outlook for banana supplies.

BB&T Capital Markets analyst Heather L. Jones noted that bananas should become more profitable for the companies as supplies from Latin America become constrained.

Through July, she noted that Ecuadoran banana exports declined more than 10 percent from the prior year and were at their lowest levels since 2007. The decrease was the result of numerous factors, including poor weather conditions and underinvestment in fertilizers and pesticides by growers as a result of weak pricing.

For Chiquita, she noted that the company's cost-saving plan should also improve margin in 2013. Last month, the Charlotte, N.C., company said it has started a search for a new CEO and initiated a cost-cutting plan in an effort to turn around results. It posted a 92 percent decline in second-quarter net income from the 2011 quarter that benefited from a hefty income tax benefit. Jones raised her 2012 earnings estimate on the company and set a $9 price target.

For Fresh Del Monte, Jones said the company's balance sheet positions it to consider banana or banana production assets. The Coral Gables, Fla., company posted weaker sales of bananas and other produce and prepared foods in its second quarter, but net income rose 63 percent on lower charges and expenses. The analyst set a $30 target on the stock.

In afternoon trading, shares of Chiquita Brands International Inc. gained 10.4 percent, or 67 cents, to $7.12. Shares of Fresh Del Monte Produce Inc. rose 6.1 percent, or $1.46, to $25.49.

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