By Zacks Equity Research
 

Earnings momentum for Fresh Del Monte Produce Inc. (FDP) has been trending up over the past week after the farm goods dealer's second consecutive earnings beat this year.

The company delivered a positive surprise of 11% in the second quarter because of benefits realized from its strategic initiatives, operational strength, elasticity in its logistics, discreet product supply management and expanding global customer base.

With a price-to-book multiple of just 0.8 and a price-to-sales ratio as low as 0.4, this Zacks No. 1 Rank ("strong buy") stock offers a promising value proposition for investors.

Impressive second quarter

On July 31, Fresh Del Monte reported second-quarter earnings per share of $1.01, a significant jump of 31.2% from the year-ago earnings of 77 cents. It also surpassed the Zacks Consensus Estimate of 91 cents.

However, net sales slumped 7.9% year over year to $957.6 million. Net sales of bananas dipped 8.8% to $424.9 million, while other fresh produce sales were down 4.8% to $453.8 million. Net sales of prepared foods slipped 18.7% to $78.9 million.

Despite the sales decline, the company managed to improve gross profit by 0.8% to $103.7 million with the help of higher sales prices on other fresh produce, operational advancements and lower ocean freight costs. Gross margin of 10.8% compared favorably with the year-ago margin of 9.9%. The company's operating income jumped 26.4% to $70.8 million on account of improved gross profit, lower asset impairment and other charges, and lesser selling, general and administrative expenses.

Earnings estimates move up

In the last week, the Zacks Consensus Estimate for 2012 increased 6.2% to $2.39 based on upward revisions from four of five estimates. The Zacks Consensus Estimate for 2013 advanced 4.2% to $2.48 over the same time frame as four of five estimates moved higher. The estimates for 2012 and 2013 reflect an annualized growth of 31.2% and 3.7%, respectively.

Valuation shows promise

The forward prospects of Fresh Del Monte remain promising as evident from a price-to-earnings multiple of 10.5, P/S ratio of 0.4 and a P/B ratio of 0.8. (A P/E below 15.0, a P/S ratio lesser than 1.0 and a P/B ratio under 3.0 generally hints at a value stock.) Moreover, the company has a one-year ROE of 7.1%, on par with the peer group average. Further, Fresh Del Monte's shares have gained nearly 14% since March 22.

Founded in 1886, Fresh Del Monte is based in George Town, Cayman Islands. The company engages in producing, sourcing, transporting and marketing fresh and fresh-cut produce across the globe. The company is also a leading producer and distributor of prepared food in Europe, Africa, the Middle East and the countries that were formerly part of the Soviet Union. It offers fresh produce primarily under the Del Monte brand, as well as under the UTC and Rosy names, as well as prepared fruits and vegetables, juices, beverages and snacks under the Del Monte, Fruit Express, Just Juice and Fruitini brands.

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