Del Monte Foods Company (NYSE: DLM) is
one of the largest producers and distributors of branded food and pet products for the U.S. retail market. Its Consumer Products segment produces fruits, vegetables, tuna, broths and tomato-based foods under such well-known brand names as Del Monte, StarKist, S&W, Contadina and College Inn. Its Pet Products segment offers the Meow Mix, Kibbles 'n Bits, 9Lives, Milk-Bone, Meaty Bone, Snausages and Pounce brands. The company also produces and distributes private label food and pet products. ConAgra Foods (NYSE: CAG) and General Mills (NYSE: GIS) are major competitors.
Del Monte pleased investors last week, when it reported fiscal Q3 EPS of 28 cents and revenues of $1 billion. Analysts had been expecting 24 cents and $960 million. The CEO attributed success to pricing actions and cost reductions. Management also guided Q4 EPS to 27-31 cents (25 cent consensus) and Q4 revenues to about $0.997-$1.02 billion ($992.8M consensus).
The share
price popped through 30-day, 50-day and 90-day moving average resistance on the news and then moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with one "strong buy", one "buy", six "holds" and one "underperform". The DLM P/E ratio (15.78), Price to Sales ratio (0.52), Price to Book ratio (1.28), Price to Cash Flow ratio (8.27), Price to Free Cash Flow ratio (27.73) and EPS Growth rate (15.38%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 89% of the outstanding shares. Over the past 52 weeks, the stock has traded between $7.57 and $12.94. A stop-loss of $7.80 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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