Del Monte Foods, Co.

Company Description

Del Monte Foods manufactures and distributes premium quality, nutritious food products under Del Monte, Contadina and other brand names. The company is the largest producer and distributor of canned vegetables and fruit in the United States.

Del Monte sells its products primarily through national grocery chains and independent grocery stores in addition to warehouse club stores and mass merchandisers.

Sales Up 8.4%

On Feb 25 Del Monte announced third-quarter results for fiscal 2009 that included an 8.4% increase in net sales. Quarterly sales were just over $942 million, up from $869 in the same quarter last year.

Earnings per share were well above Wall Street's expectations. Del Monte reported EPS of 30 cents, 36% higher than the 22 cents that was expected.

This was the company's fifth consecutive surprise. The last 4 surprises average 21% per announcement.

Raising Guidance

In the same announcement, Del Monte also raised is guidance for fiscal 2009. Earnings per share are now projected to be between 64 cents and 68 cents, up from between 58 cents and 62 cents.

Del Monte expects to add between 9% and 11% to its 2008 sales figure of $3.2 billion. This projection is up 1% on both ends of the range.

Richard G. Wolford, Chairman and CEO, said "Our robust performance and the strength of the top line are the direct result of Del Monte’s steadfast execution of its Accelerated Growth Plan. Our earnings are now benefiting from our strategic pricing plan..."

Growth and Valuation

The consensus estimate for 2009 is now 66 cents, up from 50 cents one month ago. Estimates for 2010 are now averaging 76 cents, up from 67 cents.

Shares are trading in line with the company's peers as the P/E ratio is just over 11 times earnings and the PEG ratio is 1.7.

The Chart

Shares of DLM formed a double-bottom toward the end of 2008 which sent shares into a higher, but range-bound pattern. Since the most recent earnings announcement shares have been able to break out are currently trading above that range. Take a look at the chart below.