Del Monte Foods Company

Del Monte Foods Company (DLM) extended its tremendous earnings surprise track record recently, when it beat for the 9th consecutive time.

Company Description

Del Monte Foods distributes food and pet products in the United States and South America. It owns many well-known brands such as Del Monte, Contadina, Meow Mix, Kibbles 'n Bits, 9Lives and Milk-Bone.

The company is not affiliated with Fresh Del Monte, the fruit and vegetable provider.

Del Monte Earnings Surprise Streak Continued

On Mar 4, Del Monte reported fiscal 2010 third quarter results that surprised on the Zacks Consensus by 61.9%.

The company has put together a remarkable string of earnings surprises, especially considering the economic conditions of the past few years.

It has surprised by an average of 267% over the last 4 quarters alone. Earnings per share were 34 cents compared to the Zacks Consensus of 21 cents.

Sales rose 7.5% to $1.013 billion compared to $942.3 million in the year ago quarter. The quarter was boosted by volume gains in existing products in both Consumer and Pet Products.

Consumer Products, the larger of the two segments, saw sales rise 6.9% to $544.4 million on strong sales of existing products of vegetables and fruit. Pet Products jumped 8.3% as dry dog food and pet snacks were hot.

2010 EPS Guidance Raised

Del Monte increased its forecast to a range of $1.07 to $1.11, including 11 cents related to refinancing activities, from its prior guidance of 93 to 97 cents.

Following the quarterly results, analysts moved to raise estimates. The fiscal 2010 Zacks Consensus Estimate jumped 14 cents to $1.19 per share in the last 30 days as 5 estimates moved higher.

For the fourth quarter, the Zacks Consensus rose 1 cent to 20 cents in the last month. Del Monte expects sales and EPS to be lower than the year ago period due to the quarter being 1 week shorter.

Value Fundamentals

Del Monte is a Zacks #1 Rank (strong buy) stock. It has a solid 5-year average return on equity (ROE) of 11.22%. Del Monte is trading at just 12.1x forward earnings, well within the value parameters. The company also has a price-to-book ratio of just 1.6, which is under the industry average of 1.9.

As an added bonus, Del Monte also pays a dividend, currently yielding 1.40%. This is much better than the industry, which averages no dividend at all.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

Read the full analyst report on DLM