Fresh Del Monte (NYSE:FDP) managed to post earnings that beat expectations by 19%. EPS came in at $1.19 for 2Q (versus $0.99 consensus) and revenue beat marginally. But shares remain virtually flat for the last month. The 2Q earnings beat comes after the company beat earnings consensus in 1Q by 50%, but it also missed 4Q 2013 by over 100%. In any case, the 2Q earnings were up 16% y/y. Full year 2014 consensus has gone from just $2.18 a couple months ago to $2.43 today.
Shares are up 17% since we first profiled the company. At the time, we were not fans of the company and put a target range of between $25 to $32.50 on the stock. It's now trading at the upper end of that range. In our article, we noted,
The risk-reward appears to be fairly compelling, but given the variability of the business, I'm not a big fan of relying too much on earnings estimates... Del Monte operates in some difficult environments and has a level of geopolitical risk to it. While the shares appear to trade cheaply, in the context of the banana industry and its peers, it's not. Del Monte is not a growth story, nor is it a value play. Its modest 2% dividend yield is not enough to attract investors as a pure income play.
However, it is worth noting that the company's strong 2Q showing was attributed to the fact that it's diversifying across regions and products, per management. They also noted that the company is focusing on maximizing operating efficiencies -- note that the lack of costs control and vertical integration are points of concern for us.
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