Fresh Del Monte Produce, Inc.

FDP Details

Fresh Del Monte Produce, Inc. (NYSE: FDP) is involved in producing, marketing, and distributing fruits, vegetables, and other prepared foods in North America, Europe, the Middle East, and Asia. Its operating segments are 1) Fresh and Value-Added Products, which includes pineapples, fresh fruits and vegetables, avocados, and other prepared foods like juices, meals, and snacks, 2) Banana, and 3) Other products & services include poultry and meat products, plastic products, and other third-party freight services.

Latest News:

• Quarterly Dividend: On February 23, 2022, the company declared a quarterly dividend of USD 0.15 per common share, payable on April 01, 2022, to shareholders of record on March 09, 2022.

FY21 Results:

• Flat Topline: The company's net sales increased by 1.18% during FY21 (ended December 31, 2021) to USD 4.25 billion from USD 4.20 billion during FY20 (ended January 01, 2021), driven by growth in Other products and services segment.
• Growth in Net Income: FDP witnessed an increase in net income to USD 79.9 million during FY21 from USD 46.3 million reported during FY20.
• Cash and Debt Position: As of December 31, 2021, the company had cash & cash equivalents of USD 16.1 million and total debt of USD 529.00 million.

Key Risk:

• Customer Concentration Risk: FDP's top ten largest customers contributed 30% of its net revenue in FY21. Further, Wal-Mart, Inc. also contributed 7% of total revenue in FY21. As a result, losing any of these critical customers could harm the company's financials and cash flows.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

FDP's stock price has fallen 25.82% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 24.10 to USD 36.57. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 31.56.

Considering the correction in the stock price, reduction in leverage, improvement in net margin and ROE, associated risks, and current valuation. We recommend a "Speculative Buy" rating on the stock at the current price of USD 26.00, down 2.40% as of March 08, 2022, at 03:58 PM ET.

Three-Year Technical Price Chart (as on March 08, 2022, at 03:58 PM ET). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.