Tuesday Diversified Food Wrap-Up: DOLE Jumps; Earnings from ADM
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Diversified food stocks slightly underperformed the S&P 500 index today -0.10% to -0.05%. Industry leaders included Dole Food Co. (NYSE: DOLE) and Nutrisystem Inc. (NASDAQ: NTRI). These stocks rose 3.45% and 2.76% on volumes of 390.13K and 1.53M, respectively. Industry laggards included Archer Daniels Midland Co. (NYSE: ADM) and Synutra International Inc. (NASDAQ: SYUT). These securities fell 3.64% and 2.28% on volumes of 13.93M and 42.08K, respectively.
Sector-wide news included orange juice futures' 26% gains for the year, and the evolution of Korean instant foods.
Archer Daniels Midland reported earnings of $0.51 a share today, missing the $0.76 consensus estimate from 13 analysts covering the company for a negative earnings surprise of 32.81%. Struggles in Europe led to oilseed processing earnings decreases, and the company's corn processing operations lost $133 million on asset impairment charges at a plastic production plant in Iowa and higher corn costs. On the brighter side, the company reported increased selling prices and volumes. Although this quarter was difficult for Archer Daniels Midland, a resolution to Europe's debt problems could see this share climb significantly.
Overall, Investor's Business Daily projected stiffer global competition for the company in the years to come but I see solid balance sheets and aggressive emerging market expansion offsetting that competition. More precisely, the company recently acquired three grain elevators in Slovakia, and is looking at expanding operations in China and India. Archer Daniels Midland has managed to increase its earnings every year since 2003 and its current valuations (P/E 8.76, P/S 0.23, P/B 1.08, and ROE 12.65%) will only become more attractive as the street overreacts to today's earnings miss.
Dole Food Co. rose today on news that it is preparing to renew its lease with the Port of San Diego. Dole ships about 20 million boxes of bananas and 3 million boxes of pineapples through the San Diego facility annually so this arrangement, once finalized, should offer shareholders future price stability.
Fundamentally, I am less excited about Dole than the street was today. First, net income comparisons with its privately held competitor Del Monte do not look good (-3.15M to 244.30M). Second, Dole's razor thin margins (its net profit margin for the trailing twelve months is -0.06%) will be squeezed as they seek to find a price point that meets current fruit and vegetable prices and U.S. consumer frugality. Finally, Dole's $1.58B in long-term debt needs to be reduced significantly before it becomes alluring to buy-and-hold investors.
The Motley Fool owns shares of Archer Daniels Midland Company. maxwellkirchhoff has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
