Fresh Del Monte Produce, Inc.

Fresh Del Monte Produce is turning increasing worldwide demand for fresh fruit and vegetables into profits. The company surprised on fourth-quarter estimates by 65.85%. With a P/E of only 10.60, FDP is also an attractive value play in the agriculture sector.

Full Analysis

Fresh Del Monte Produce, Inc. (FDP - Snapshot Report) produces and transports fresh and fresh-cut fruit and vegetables as well as fruit juices, beverages, snacks and desserts around the world.

Del Monte is a full-service fruit company involved in all segments from planting, harvesting, designing the packaging and shipping the products to distribution facilities across the globe. The company owns 700 trucks and 23 vessels outright, and charters 18 other vessels to handle the worldwide demand.

The company has recently moved into the health-conscious category for both adults and children, especially in the dessert segment. Del Monte manufactures several new fruit bars including the Pineapple Lolly which is made with 87% real fruit juice.

For those watching their calories, the company recently rolled out the Strawberry Fruit Double which is a strawberry fruit ice with a soft strawberry center. It has only 63 calories, less than 2% fat and fruit content of 41%.

The new healthy initiatives, along with favorable exchange rates, have helped Del Monte's bottom line. On Feb 26, the company surprised on analyst's consensus estimates for the fourth-quarter by 65.85%.

FDP reported fourth-quarter earnings of $34.4 million, or 56 cents per share, compared with a loss of $58.8 million, or $1.02 per share, in the prior year. Net income was 68 cents per share, excluding special charges, compared with a loss of 3 cents per share for the year-ago period. Analysts' consensus estimates called for 41 cents per share.

The company reported that price increases, strong product sales, higher banana demand and favorable foreign exchange rates pushed revenue up 15% to $848.2 million from $737.6 million in 2006.

The company also was profitable for the year, reporting $179.8 million, or $3.06 per share, compared with a loss of $142.2 million or $2.46 per share in 2006.

Brokerage analysts responded to the earnings surprise by raising estimates for the first quarter and the full year. One out of four covering analysts raised first quarter estimates in the last week by an average of one cent to 97 cents from 96 cents.

The analysts were more aggressive on raising for the full year. Three out of four covering analysts raised full-year estimates on average of 16 cents to $3.13 from $2.97 per share. Despite struggling in 2006, which Mohammad Abu-Ghazaleh, FDP's CEO, called "the most challenging year in a decade", FDP still sports a five-year average return on equity of 13.05%.

The company has beaten on estimates the last four quarters on average of 1,368%. That number is skewed higher by its third-quarter 2007 surprise of 51 cents per share compared to estimates of a loss of one cent. However, in the first and second-quarters of 2007, the company beat by 110% and 100%, respectively.

FDP is still cheap. The company has a P/E of only 10.60, well-below the industry average of 20.6. Its price-to-book is 1.52.