Stock Story -
Fresh produce company Fresh Del Monte (NYSE:FDP) missed analysts' expectations in Q2 CY2024, with revenue down 3.5% year on year to $1.14 billion. It made a non-GAAP profit of $1.06 per share, improving from its profit of $0.96 per share in the same quarter last year.
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Fresh Del Monte Produce (FDP) Q2 CY2024 Highlights:
- Revenue: $1.14 billion vs analyst estimates of $1.18 billion (3.5% miss)
- EPS (non-GAAP): $1.06 vs analyst estimates of $0.60 (76.7% beat)
- Gross Margin (GAAP): 10%, up from 9.9% in the same quarter last year
- Free Cash Flow of $117 million, up from $6 million in the previous quarter
- Market Capitalization: $1.2 billion
Translating to "of the mountain" in Spanish, Fresh Del Monte (NYSE:FDP) is a leader in providing high-quality, sustainably grown fresh fruits and vegetables.
Perishable FoodThe perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.
Sales GrowthFresh Del Monte Produce is larger than most consumer staples companies and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's revenue was flat over the last three years. This is poor for a consumer staples business.
This quarter, Fresh Del Monte Produce missed Wall Street's estimates and reported a rather uninspiring 3.5% year-on-year revenue decline, generating $1.14 billion in revenue.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Fresh Del Monte Produce has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.1%, subpar for a consumer staples business.
Taking a step back, an encouraging sign is that Fresh Del Monte Produce's margin expanded by 1.8 percentage points during that time. The company's improvement shows it's heading in the right direction, and because its free cash flow profitability rose more than its operating profitability, continued increases could signal it's becoming a less capital-intensive business.
Fresh Del Monte Produce's free cash flow clocked in at $117 million in Q2, equivalent to a 10.3% margin. This quarter's result was good as its margin was 1.1 percentage points higher than in the same quarter last year, building on its favorable historical trend.
Key Takeaways from Fresh Del Monte Produce's Q2 ResultsWe were impressed by how significantly Fresh Del Monte Produce blew past analysts' EPS expectations this quarter. We were also excited its gross margin outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed analysts' expectations. Overall, we think this was a really good quarter that should please shareholders. The stock traded up 2.3% to $25.18 immediately following the results.
