Delurking & CQB

**glennyb** Thu Dec 01, 2005 1:45 pm

Delurking & CQB
Hi, I'm fairly new here but I figured I would post on Chiquita Brands (CQB).

They are currently trading at 5.5x earnings with a Price/Book of .85 and Price/Sales of .25. Their debt is a little high but that is largely due to acquiring Fresh Express which is already helping revenue and earnings growth.

Its largest competitor - Fresh DelMonte (FDP) - is currently trading at 11 times earnings with a price/book of 1.28 and a price to sales of .47.
They look to me like they should see at least 25% revenue growth this year. It's actually looking more like 40% but this next quarter may be a doozy because of damage caused by Tropical Storm Gamma.

They are positioned to continue growing in the future. The overall industry, while competitive, has largely been hurt in the past few years due to bad management. Chiquita restructured earlier than many of it's competitors - bringing in Fernando Aguirre from Procter and gamble in 2004 to turn the company around.

I think this stock is already incredibly cheap. My inclination, however, is to wait until after the year-end earnings call and pick up what I assume will be a selling spree from problems that are largely one-time issues.

What do you folks think?

**blast_investor** Thu Dec 01, 2005 8:00 pm

Hi glennyb,

I would be cautious on CQB although both CQB and FDP right now are not expensive stocks.

I see the threat from EU banana tariff on Latin America is just too much. This is particularly true for CQB because it exports huge amount of banana from Latin America into Europe and it conducts more than 50% of its business in Europe.

CQB actually said the EU tariff potentially can cost the company $110 million per year, that is more than half of its earnings per year.

I am not expert in European politics or European banana market, maybe the threat is not that real, maybe the Latin Banana is so cheap that CQB can raise price to compensate the tariff. But most likely, if European folks just stick their gun as it is starting on Jan 1 2006, CQB earning will plummet in 2006 and the stock is not that cheap if you consider the EU tariff cost and the potential loss of banana revenue in Europe.

My point is: CQB may not be bad pick. But more homework is definately needed, particularly on the clouds from Europe.

**ghg777** Sun Jan 08, 2006 11:49 pm

CQB and FDP
CQB is more dependent upon strong banana prices than FDP is. FDP's earnings have much more to do with sales of the company's premium pineapples than was the case a few years ago.

Both stocks look relatively cheap, but recent returns on capital are unsustainable. It's a commodity business, if you know that going in CQB may be a stock worth considering. However, make sure you are prepared for a barrage of bad news whenever banana prices drop. It's always temporary, but it will make some investors queasy.

Neither stock (FDP or CQB) is a good idea if you are thinking about a short term investment. Longer term, it's hard to see CQB selling much below the current price to book ratio; so, it might be a good buy.

Just FYI - There are rumors FDP will soon be bought out (taken private). I can't confirm that story, but several media outlets have run it (I think the original source was TheDeal.com).

I included FDP on the companies to watch page of my website:

http://www.gannononinvesting.com/companies/2005/12/fresh_del_monte_produce.html

I also mentioned it on one of my podcasts:

http://www.gannononinvesting.com/podcast/2005/12/value_investing_1.html

I haven't written anything about CQB; so, you're on your own there. I hope these links are helpful.