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Bull of the Day: Fresh Del Monte Produce (FDP)

Brian Bolan

Fresh Del Monte Produce (FDP) just crushed earnings after back to back misses. That beat pushed the stock higher and it is now a Zacks Rank #1 (Strong Buy), it is the Bull of the Day.

Everyone Needs to Eat

While looking at a few foods stocks I formerly recommended I notice FDP. Maybe you don't do the grocery shopping for the family, but I am rather involved in it (too keep prices low). I have notice prices moving back to highs I have not seen in years, and its not just chicken!

Company Description

Fresh Del Monte Produce Inc. produces fresh-cut fruit and vegetables worldwide. The company provides various fresh produce products, such as bananas, pineapples, melons, tomatoes, grapes, apples, pears, peaches, plums, nectarines, cherries, citrus, avocados, blueberries, and kiwi. FDP was founded in 1886 and is based in George Town, Cayman Islands.

FDP Beats Estimates

On April 29, the company posted earnings of $1.00 per share, $0.35 ahead of the Zacks Consensus Estimate of $0.65. That is a beat of 53%, and the type of thing that makes you take a second look at the stock.

Recently, the company has not had that much success when it comes to earnings reports. Outside of the most recent release, the company was only able to beat the Zacks Consensus Estimate in one of five quarters. The average miss wasn't the size of a kiwi either, these were big melon sized misses.

Still the company has been to post year over year revenue growth rates of more than 6.8% in each of the last four quarters.

FDP Sees Estimates Moving Higher

The Zacks Consensus Estimate for 2014 for FDP had been sliding over the last few months. It was $2.00 in December of last year and then kicked lower to $1.88 in February. By April the estimate had bottomed out at $1.80... but after the recent beat, analysts pushed estimates for 2014 up to $2.30. That is a huge increase following a $0.35 beat.

The 2015 numbers are holding steady at $2.10, the same spot there were at in February of this year. This could be due to a lack of visibility by the company, analysts or both.


In this market, valuation is key -- buying high forward PE stocks is just not the smartest move. FDP has a great valuation picture, with a forward PE of 12x compared to 17x industry average, while the trailing 12 months PE of 16x is also below the 21x industry average. Here is where the value guys get excited, this stock is trading at 0.9x book, way below the 2.3x industry average. So the less than 1x book means that if all the assets were sold, there would be more money than the value being placed on the enterprise in a stock price times shares outstanding. To sweeten the pot, the stock also trades at 0.4x sales, compared to a 1x industry average.

The Chart

Usually I use the Price and Consensus chart to show how earnings estimates help investor get an edge on where stock prices are headed. This P&C chart doesn't really help for that, but I am showing it anyway in the name of consistency for one and visibility for two. I may be consistent in the use of this chart, but the analysts are anything buy consistent with their estimates. The key issue for them could be visibility. With solid growth and even a little visibility, this stock should run... but even more to the point the value investors will be in there too with the great valuation.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Brian is also the editor of Breakout Growth Trader a trading service that focuses on small cap stocks and also carries a risk limiting strategy. Subscribers get daily emails along with buy, and sell alerts.
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