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Del Monte Foods Earnings Fruitful

Posted: Sep 09, 2009 10:59 AM by Greg Sushinsky

Tickers in this Article: SFD, DF, CAG, KFT, DLM

Del Monte Foods (NYSE:DLM), the San Francisco based packager and marketer of branded foods such as fruits and vegetables under the Contadina and Del Monte labels, along with a strong lineup of pet foods such as Meow Mix and Kibbles n' Bits for our cherished companion animals, showed strong performance in its first fiscal quarter of 2010. Led by higher prices and lower costs, the foodmaker continued this encouraging trend from the preceding quarter.

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Fruits and Vegetables for Profit
Del Monte earned $58.6 million, or 29 cents, per share this quarter, compared with a loss of $10.1 million, or minus 5 cents per share, in the same quarter a year ago. Revenue was boosted by 12% to $813.7 million from $726.2 in the year ago first quarter. These earnings are on the heels of Del Monte's strong showing in its fourth quarter of 2009, where it earned $71.5 million, or 35 cents, a share from continuing operations. This is opposed to $50.4 million, or 20 cents a share, in the previous year's fourth quarter. Revenue in Q4 reached $1.057 billion, compared with the fourth quarter of the previous year at $876 million. These consecutive quarters, the fourth quarter 2009 and now in its fiscal first quarter bodes well obviously for the canned food maker, and perhaps suggest the same also for the food industry as a whole.

Emerging from Recession?
While many of the food makers held on reasonably well in the recession, some have done better than that. Food giant Kraft (NYSE:KFT) continues to be a powerhouse, and is not only growing more profitable but continues its vigorous pursuit of Cadbury, which shows Kraft's financial strength and clout, even in the face of future cocoa surcharge increases for candy and food makers.

ConAgra (NYSE:CAG), another of the food giants, was cited in an investment article as having both attractive products such as its Healthy Choice line along with a good blend of other food offerings along a wide price range, as well as being one of the stronger food companies with a stock that is attractive at its current valuations. Much the same can be said for Dean Foods (NYSE:DF), with a dairy line that led the way for another good quarter as the company astutely managed costs while boosting profits.

Not everyone in the food sector made out well. Smithfield Foods (NYSE:SFD), the nation's largest pork producer, was expected to post a 55 cents per share loss for its fiscal first quarter as a reflection of the difficulties in the pork industry.

Big Food Producers Click
Still, Smithfield's recent results aside and it also remains a solid, well-positioned company overall, many of the big food companies ground through the recession on a combination of disciplined management, some relief in recent lower commodity prices and the ongoing need of, well, people to keep eating, despite their economic woes. Del Monte, with its strong position coming out of the recession, looks like a company set to do better, as we enter economic recovery.

As Del Monte's Business Rises, Will the Stock Rise, Too?
While others have cited the consumer stocks as uncertain businesses, we don't see it that way. The food industry could actually be on the cusp of a revival of an age-old value story, where Del Monte, a star in the mundane canned food and packaging business, will continue to collect vigorous profits and the market will eventually take note and boost the stock. (Read Buy When There's Blood In The Streets, to learn how contrarian investors find value in the worst market conditions.)

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By Greg Sushinsky

Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.

Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.

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