Fresh Del Monte Produce Inc (FDP): One Company to Go Bananas For

Net sales for bananas were $2 billion for FY 2012, a decrease of 2% from the prior year primarily because of the product supply surcharge imposed in North America. In 4Q 2012 banana net sales increased 2% to $486 million. But in 1Q 2013 comparable-net sales of bananas slipped again and were down 3%.

Improvements in sourcing and logistics cost related to Chiquita Brands International, Inc. (NYSE:CQB)’s value chain restructuring offset the decrease in sales, and comparable operating income increased to $27 million in 1Q 2013 from $25 million in the same period of 2012.

Chiquita Brands International, Inc. (NYSE:CQB)’ stock is up 25% year-to-date and has nearly doubled over the past year. The company isn’t perfect, but with the restructuring and new direction it is headed, it continues to be the best investment for the industry.

Chiquita Brands International, Inc. (NYSE:CQB) trades at about 7 times estimated EBITDA while Fresh Del Monte Produce Inc (NYSE:FDP) trades at 7.8 times estimated earnings, making both more competitive and interesting to investors than Dole. At $12 per share, Dole Food is valued at around 10.2 times its forward EBITDA.

Conclusion

The erratic and volatile nature of the fruits and vegetables industry makes it a risky investment, regardless of company. The prices of produce are greatly affected by the uncontrollable factor of weather. And much of each company’s sales come from the Euro zone, with its accompanying financial downturn. To be certain some companies are safer than others, but in this industry no one company is without risk.

Erin McBride has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article 1 Company to Go Bananas For originally appeared on Fool.com.

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