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Stock research on global mid-cap companies, Evaluate Research

Equity Bottom-Up

Fresh Del Monte Produce / Equity Bottom-Up

Fresh Del Monte reported financial results for the fourth quarter and year ended December 2016 which were in line with our expectations. Gross profit for the full year 2016 stood at $461.4 million implying a margin of 11.5% vs. a gross profit of $342.3 million in FY2015, a margin of 8.4%. The increase in gross profit margin was driven mainly by lower ocean freight and fruit costs along with higher selling prices in the company’s other fresh produce and banana business segments. The higher gross profits drove an increase in EPS which stood at $4.74 in FY2016 vs. $2.43 in FY2015, an increase of 95% YoY. 4Q2016 EPS stood at $0.26 vs. a net loss of -$0.10 during 4Q2015.
Net sales for the year decreased to $4,011.5 million vs. $4,056.5 million in 2015, a decrease of 1.1% YoY. For the fourth quarter of 2016, net sales decreased to $954.6 million vs. $977.9 million in the fourth quarter of 2015. The decrease in net sales came on the back of lower sales in the banana and prepared food segments partially offset by higher sales in the company’s other fresh produce segment. Among the company’s major product categories, bananas and gold pineapple witnessed a volume decline of 4% and 5%, respectively during FY2016. Volume for fresh-cut products was up 11% whereas sales of avocados witnessed the largest jump of 31% during the period with a 21% volume increase and 8% pricing increase. During 4Q2016, avocados sales were up 55% as prices increased 57% due to tighter supply conditions.
As for 2017, the company seems confident of achieving growth in most of its product categories. During our one-on-one call, management mentioned that they expect banana volumes to increase during the year as the supply shortage in Philippines eases. Management also said that while there is still some supply shortage for avocados, they expect volume to be normal going forward resulting in price normalization.
Analyst: Ajeya Patil

Fresh Del Monte reported financial results for the fourth quarter and year ended December 2016 which were in line with our expectations. Gross profit for the full year 2016 stood at $461.4 million implying a margin of 11.5% vs. a gross profit of $342.3 million in FY2015, a margin of 8.4%. The increase in gross profit margin was driven mainly by lower ocean freight and fruit costs along with higher selling prices in the company’s other fresh produce and banana business segments. The higher gross profits drove an increase in EPS which stood at $4.74 in FY2016 vs. $2.43 in FY2015, an increase of 95% YoY. 4Q2016 EPS stood at $0.26 vs. a net loss of -$0.10 during 4Q2015.
Net sales for the year decreased to $4,011.5 million vs. $4,056.5 million in 2015, a decrease of 1.1% YoY. For the fourth quarter of 2016, net sales decreased to $954.6 million vs. $977.9 million in the fourth quarter of 2015. The decrease in net sales came on the back of lower sales in the banana and prepared food segments partially offset by higher sales in the company’s other fresh produce segment. Among the company’s major product categories, bananas and gold pineapple witnessed a volume decline of 4% and 5%, respectively during FY2016. Volume for fresh-cut products was up 11% whereas sales of avocados witnessed the largest jump of 31% during the period with a 21% volume increase and 8% pricing increase. During 4Q2016, avocados sales were up 55% as prices increased 57% due to tighter supply conditions.
As for 2017, the company seems confident of achieving growth in most of its product categories. During our one-on-one call, management mentioned that they expect banana volumes to increase during the year as the supply shortage in Philippines eases. Management also said that while there is still some supply shortage for avocados, they expect volume to be normal going forward resulting in price normalization.
Analyst: Ajeya Patil

Fresh Del Monte Produce

95% EPS Growth in FY2016