Fresh Del Monte Produce (NYSE:FDP) Posts Q4 Sales In Line With Estimates
Fresh produce company Fresh Del Monte (NYSE:FDP) reported results in line with analysts' expectations in Q4 FY2023, with revenue down 3% year on year to $1.01 billion. It made a non-GAAP profit of $0.25 per share, down from its profit of $0.38 per share in the same quarter last year.
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Fresh Del Monte Produce (FDP) Q4 FY2023 Highlights:
Revenue: $1.01 billion vs analyst estimates of $1.00 billion (small beat)
EPS (non-GAAP): $0.25 vs analyst expectations of $0.29 (13.8% miss)
Free Cash Flow was -$19.2 million, down from $25.6 million in the previous quarter
Gross Margin (GAAP): 5.6%, down from 7.9% in the same quarter last year
Market Capitalization: $1.15 billion
Translating to "of the mountain" in Spanish, Fresh Del Monte (NYSE:FDP) is a leader in providing high-quality, sustainably grown fresh fruits and vegetables.
Packaged Food
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods, prepared meals, or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences.The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales Growth
Fresh Del Monte Produce is larger than most consumer staples companies and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's revenue was flat over the last three years. This is poor for a consumer staples business.
This quarter, Fresh Del Monte Produce reported a rather uninspiring 3% year-on-year revenue decline to $1.01 billion in revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 2.8% over the next 12 months, an acceleration from this quarter.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Fresh Del Monte Produce burned through $19.2 million of cash in Q4, representing a negative 1.9% free cash flow margin. The company increased its cash burn by 65.8% year on year.
Over the last eight quarters, Fresh Del Monte Produce has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 1.5%, subpar for a consumer staples business. However, its margin has averaged year-on-year increases of 2.5 percentage points over the last 12 months. Continued momentum should improve its cash flow prospects.
Key Takeaways from Fresh Del Monte Produce's Q4 Results
It was encouraging to see Fresh Del Monte Produce narrowly top analysts' revenue expectations this quarter. That stood out as a positive in these results. On the other hand, its operating margin missed analysts' expectations as it recognized a $133.8 million non-cash asset impairment charge (assets in the North American fresh and value-added product segment and goodwill in prepared foods). Without the impairment charge, the company's operating margin would have been 3.4%. Even when accounting for the adjustments, however, FDP's EPS still missed Wall Street's forecast. Overall, this was a mediocre quarter for Fresh Del Monte Produce. The company is down 3.8% on the results and currently trades at $23 per share.
Fresh Del Monte Produce may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
