Earnings Preview: Del Monte

Del Monte Foods Co.(DLM) is scheduled to report its third-quarter 2011 financial results on Thursday, March 3, 2011. Currently, the Zacks Consensus Estimate for earnings is 40 cents per share and revenue is expected at $1,034 million for the quarter to be reported.

Briefing on Second-Quarter 2011

Del Monte, which faces a stiff competition from Dole Food Company (DOLE - Snapshot Report) and Con Agra Foods Inc. (CAG - Analyst Report), saw an year over year earnings growth of 32.2% to 41 cents from 31 cents a share in the year-ago period. Profit was primarily driven by higher income from continuing operations.  However, earnings missed the Zacks Consensus Estimate by 6 cents.

Del Monte’s total sales dipped 1.9% to $941 million, compared to $960 million for its 13-week quarter ended October 31, 2010, reflecting a decrease of 1.1% in volumes. Sales were below the Zacks Consensus Estimate of $958 million.

Management Guided

At its last earnings conference call, the company lowered its guidance for net sales to the range of negative 1% to a positive 1%. However, management reaffirmed its diluted EPS from continuing operations in the range of $1.38 to $1.42 for fiscal 2011.

Zacks Consensus

Analysts covered by Zacks expect Del Monte to post third-quarter 2011 earnings of 40 cents a share. The current Zacks Consensus Estimate represents a year-over-year increase of 17.6% and ranges from a low of 37 cents to a high of 44 cents.

The current estimate remained stagnant over the last 90 days as none of the analysts changed their estimates.

Mixed Earnings Surprises

With respect to earnings surprises, Del Monte has outpaced the Zacks Consensus Estimate by an average of 31.8% over the last four quarters, ranging from 7.4% to 61.9%. keep only 1 digit after the decimal.

Our Recommendation

Del Monte enjoys enhanced trade-fund management capabilities and keeps upgrading its marketing, planning and budgeting processes. With this the management expects to generate higher demand, drive supply chain efficiencies and reduce working capital levels. Besides, the company also realizes operational efficiencies which enhance the long-term growth. However, the pet product and food product categories in which the company participates are highly competitive. There are numerous brands and products that compete for shelf space and in terms of sales. Del Monte’s branded products also face strong competition from private label products that are generally sold at lower prices.  

Del Monte currently holds a Zacks #4 Rank. This translates into short term ‘Sell’ rating, though on a long term basis we maintain a Neutral rating on the stock.

Read the full analyst report on CAG

Read the full analyst report on DLM

Read the full analyst report on DOLE