Limoneira Turns In Great First Quarter Earnings Call, Remains Undervalued

| About: Limoneira (LMNR)


Limoneira first quarter revenue increased 49%.

Lemon sales set to double by fiscal 2015.

Real estate holdings set to show shareholder value as East Area I could yield $150 million.

Agribusiness company Limoneira (NASDAQ:LMNR) reported solid first-quarter earnings on Monday after the market closed. The company continues to add to its vast acreage for fruits through acquisitions, which created significant profit realization in the first quarter. Investors should not be ignoring this company as it grows its acreage and begins to realize monetization of its vast real estate assets.

In the first quarter, revenue increased 49% to $25.9 million. The company's agribusiness unit saw revenue rise to $24.7 million from last year's $16.3 million. This segment was led by lemons, which turned in revenue of $20.9 million, a large increase from last year's $14.0 million. The increase came from increased acreage and also higher average price per carton. Oranges and specialty fruits contributed revenue of $1.9 million and $1.9 million respectively.

In my top ten picks article, I highlighted the growth of acreage as a key reason to invest in Limoneira. At the beginning of the year, the company had 1870 acres for lemons, 1250 acres of avocados, 1700 acres of oranges, and 690 additional acres for other fruits. Several acquisitions could see an additional 1280 acres for lemons by 2018. The acquisition of Associated added $2.0 million in additional operating income. This continues to show that Limoneira can acquire companies and integrate them into their networks and generate revenue and profits.

A new lemon project will be completed in fiscal 2015 that will greatly grow the revenue from lemon acreage. The company said, "Our annual lemon packaging capacity is estimated to be approximately twice what it is today." The company started the year with 2300 additional acres, many focusing on lemons. The addition of acreage from acquisitions and the increased packaging capabilities will turn lemon sales into huge growth for Limoneira.

In the first quarter, Limoneira saw real estate revenue of $44,000. This is a slight decline from last year's $48,000. Real estate remains an event driven revenue driver and will pick up going into 2015 as several projects begin monetization. Limoneira will break ground on East Area I later this year and should begin home sales in 2015. This remains the biggest catalyst for the company as it will recognize $150 million in proceeds. The first quarter update from Limoneira was, "We continue to make progress towards breaking ground on East Area I."

The company's third business segment of rental operations saw a slight increase in the first quarter. Revenue increased from $1.0 to $1.1 million. By the end of 2014, Limoneira will see 71 workforce houses come available. These additional houses will provide $850,000 to $900,000 in annual rental income.

Limoneira turned up on my top ten stock picks for the year list. The three reasons I gave investors to consider Limoneira were: rich agricultural assets, East Area I and II, and acquisitions. After the first quarter, it is easy to see that the company is focusing on all three of these areas and investors should continue to use these as short- and long-term catalysts for an investment in this company.

Add it all up and you get a nice growing stock. The company is on pace to double its lemon sales by 2015. In that same year, the company will begin selling homes in its biggest real estate project. These two items along with the company's focus on growing through acquisitions should benefit shareholders.

Shares of Limoneira sit around $23. In 2014, shares of Limoneira are now down 12.5%. The company has a market capitalization of $325 million, which could be only two times the amount realized from East Area I and II. The company remains undervalued for long-term investors, who will see the profits from real estate and the acquisitions of increased acreage. I first highlighted the stock in August, before selecting the company for 2014. In both those companies I told investors the stock should double in five years. I continue to stand behind this and think investors still have time to get behind this high growth stock.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LMNR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.