Chiquita Brands: Don’t Go Bananas Over 1Q Warning
Ockham Research submits:
Chiquita Brands (CQB) announced today that first quarter results will be “substantially lower” than the same quarter a year ago. Of course this is never good news, especially because consensus analysts’ estimates had called for the company to grow first quarter earnings by nearly 16% over the $.51 cents reported last year (excluding 1-time charges). Management did not give a new number to expect, and simply warned it will be worse than last year mainly due to weak European banana demand and pricing (volume down 13%, prices down 11%). The stock of the marketer and distribute of fresh produce fell as much as 3% on the news, but we think attractive value remains despite the downward guidance for the current quarter.
Of course it is disappointing when a company misses their target, but the optimist may see this as an opportunity because management reaffirmed their outlook for the full year. Chiquita management said they still maintain their guidance for full year comparable net income of $110 million to $120 million for fiscal 2010, which would roughly equate to an EPS of $2.45 to $2.68. They expect pricing to improve throughout the year as
they will constrain supply in Latin America and Asia. Conservatively, if we assume that headwinds will restrict the company to just reach the lower end of this earnings target range, it yields a simple P/E multiple of only 6.5x. Clearly, that is not an expensive earnings multiple in any market condition.
Investing, Long Term Investment, stock market | admin March 31, 2010
RSS feed for comments on this post.
