Invest in bananas? Sure, try Chiquita (CQB)

You know this sticker, I’m sure 90% of you have peeled it off before you bit into a tasty Chiquita banana. Of course those bananas can’t grow in the crappy climate of the United States, they come from warm wonderful weather found in South America. Which is why Chiquita is headquartered in Cincinnati, no where near South America and home to WKRP. But back to Chiquita Brands International, Inc. (NYSE:CQB) because we could spend hours talking about Loni Anderson, I guess she never got those love letters I wrote her back in 81′, oh well.

Shares of Chiquita Brands International are up 19% in last month even after reporting a loss in Q1 07. Earlier this month Chiquita posted a net loss of $3.4 million, or 8 cents per share, compared to net earnings of $19.5 million, or 46 cents per share, in first-quarter 2006. Wall Street had expected a loss of 4 cents per share. Their revenues grew to $1.19 billion from $1.15 billion in the year-ago quarter. Analysts had predicted revenues of $1.22 billion.

The quarter included a charge of $5 million, or 12 cents per share to to get out of several unprofitable farm leases in Chile but earlier this month Chiquita announced the sale of its cargo ship fleet for $227 million which will make the books positive for the remainder of the year.

Chiquita‘s banana operation had net sales of $523 million, up 8 percent from the year-ago quarter, and operating income of $33 million, compared to $37 million a year ago. They continue to be affected by cost increases, and lower prices and higher tariffs in Europe. But Chiquita isn’t just about bananas, they operate Fresh Express and they’re moving into international markets with Fruit in a Bottle and Fresh & Ready packs (adding an extra week to bananas shelf-life). Since last summer they have managed to add a 5% value share in the chilled juices segments in Belgium and started to roll products out in Germany back in March. Holland and Switzerland are planned for September. They are facing growing pains in their Salad and Healthy Snacks (operating income was $1 million compared to $12 million a year ago) and Other Produce segments (net sales increased 3 percent to $378 million) but they are thinking big picture and long term growth, which is the right direction for shareholders.

Barron’s ran a piece (worth your time to read) on Chiquita over the weekend (5/19) and had this to say:
The push to transform the 107-year old company (Chiquita) "from a commodity produce supplier to a more value-added, healthy consumer products company" bodes well for profit growth, says Oppenheimer analyst Barry Sine, who expects per-share earnings to double to $1.50 next year from 75 cents in 2007… At about 54%, Chiquita’s debt-to-capital ratio is a tad high, and input costs are at the mercy of the weather and fuel prices. Salad profits also were hurt by an e. coli scare last fall, and will take time to recover. But given the steps that Chiquita is taking to reduce profit volatility, Oppenheimer’s Sine reckons that the company’s shares are worth $22.

That article helped move shares of Chiquita 4.5% today to close at $17.83. Hungry for a banana yet? It may be time to start thinking about your play on Chiquita.

Frank Lara Jr.

Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.