Del Monte's Top-Line Declines - Analyst Blog

Del Monte Foods Co. (DLM), producer, distributor and marketer of branded pet products and food products posted results for the second-quarter of 2011, a 13-week quarter ending on October 31, 2010.

Quarterly Details

San Francisco-based Del Monte's earnings grew 32.2% year over year to 41 cents from 31 cents a share in the year-ago period and missed the Zacks Consensus Estimate by 6 cents. Profit was primarily driven by higher income from continuing operations.

For fiscal 2011, EPS from continuing operations was reiterated in the range of $1.38 to $1.42, consistent with the company's long-term EPS growth target of 7% to 9% for the year.

For the quarter under review, Del Monte's total sales dipped 1.9% to $941 million, compared to $960 million for its 13-week quarter ended October 31, 2010, reflecting a decrease in volume of 1.1%.

Sales were below the Zacks Consensus Estimate of $958 million. For fiscal 2011, Del Monte lowered its revenue guidance and now expects to generate revenue growth of -1% to 1% compared to 1% to 3% stated earlier.

Segments

For the first quarter of 2011, the Consumer Products segment saw a dip in sales of 5.4% to $507.7 million. The decrease was primarily attributable to a decline in base unit volume due to declines in retail (tomato and vegetable) and non-retail channels (fruit and vegetable).

However, the Pet Products segment posted sales growth of 2.6%, driven by strong unit volume growth, pricing and new product volume.

Cash Flow

Del Monte exited the quarter with cash and cash equivalents of $20.2 million and debt to capitalization ratio of 40%. Capital expenditure for the first quarter of 2011 was $33.6 million.

Zacks Rank

Del Monte Foods Company currently has a Zacks #3 Rank, implying a short-term Hold recommendation.