Dole Food Company, Inc. (DOLE): Is This Food Company a Buy Right Now?

Stiff competition

Chiquita Brands International Inc (NYSE:CQB) has been revamping itself by divesting areas like the smoothie business, and instead focusing on its core business. It recently partnered with Universal Pictures and Illumination Entertainment and co-sponsored Despicable Me 2. The company sees this as its largest promotional activity to date and anticipates deriving sales from this in its second quarter. The company’s turnaround effort has been bearing fruit and business has been improving.

Chiquita Brands International Inc (NYSE:CQB)’s restructuring plan is probably resulting in $60 million in cost savings annually, according to management, and it is no surprise that the stock is hovering near 52-week highs. The valuation is also not too high even though the stock is at the top end of its trading range, with a forward price-to-earnings (P/E) ratio of just 11x. Investors who are looking for a turnaround play can surely consider Chiquita for their portfolio.

At the same time, Fresh Del Monte Produce Inc (NYSE:FDP) is focused on extending its non-conventional delivery channel and sales of its fresh-cut products. The company is expanding its business in the Soviet Union and Turkey and is witnessing strong demand in those countries.

It reported results recently including a 7% rise in its sales to $1.0 billion and turned in EPS of $1.10, crushing estimates. It provides a dividend yield of 1.8% and the valuation is not rich even though the stock trades at its 52-week highs. A trailing P/E ratio of 13.4 and a forward P/E ratio of 12.6 mean that there is potential for earnings growth. A payout ratio of just 20% means that the company can increase its dividend.

Conclusion

Although Dole Food Company, Inc. (NYSE:DOLE) has been in the spotlight recently due to Murdock’s buyout offer, still the company expects to earn profits in the future with its recent expansion plans. It has been divesting its non-profitable businesses and investing money in the ones that are expected to generate earnings. These measures should help it do well in the future but it remains to be seen how the buyout offer plays out. The stock is richly valued at a forward P/E of 18, and it is advisable that investors tread with caution.

The article Is This Food Company a Buy Right Now? originally appeared on Fool.com and is written by ANUP SINGH.

ANUP SINGH has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. ANUP is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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