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  • Growth Potential? Acquisition Target? Bad (Pine)apple? 0 comments
    May 13, 2013 2:52 AM | about stocks: DOLE

    If you've ever visited the Dole Plantation on the island of Oahu, and tried the pineapple ice cream ... you'd find it impossible not to be a fan of the company. As a shareholder, however, the last three quarters have likely been anything but appetizing. Of eight analysts covering $DOLE, three rate it as a hold, two underperform, and three sell. Both earnings momentum and earnings strength are (based on history) projected to be extremely weak.

    Having noted that, I think Dole's management has put the company on an improved track for profitability in the long term - and from my perspective, the actionsn taken by Dole's board are, in the near term, a game changer.

    April 1, Dole announced the sale of it's "Dole Asia" branch of operations for $1.685 billion. Dole Completes Sale of Worldwide Packaged Foods and Asia Fresh Businesses

    May 2, Dole reported earnings of $0.12 per share (excluding one time items) versus expected $0.11 per share. More importantly, Dole also announced the board approval of a $200 million share repurchase program, effective immediately. Dole Food Company, Inc. Announces Authorization of Share Repurchase Program

    At Friday's closing price of $11.25 per share, this repurchase program allows Dole to buy back nearly 18 million shares - 19.85% of the entire float.

    From it's low on May 3 following Q1 earnings release, the stock has rallied 12.5% in a week. There is still a sizeable short interest in the company's stock: as of April 30, 15.7% of the float was short. Based on the trading volume of the last two weeks, that entire short interest has not been covered.

    With a market cap barely over $1 billion, Dole is not going to move the market. But the near term has provided splendid opportunity to take advantage of a short squeeze while the company seeks to reduce its float by almost 20%. Such a repurchase program will change the game for Dole's earnings in the long term, providing a solid investment to own for the longer term. Furthermore, the improved earnings capacity sale of international operations, and debt restructuring have made Dole much more attractive to private equity or as a takeover target.

    My near term price target is $12.00

    Disclosure: On Friday I bought Jun 11 calls and sold Jun 10 puts

    Disclosure: I am long DOLE.

    Stocks: DOLE
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