Attention, bargain-stock shoppers! We have a special going in the produce section today ... and investors are going bananas.
Shares of Chiquita Brands
Chiquita then proceeded to warn that despite "significant year-over-year increases in banana prices," the company would be unable to grow money on its trees in the third quarter. It said that banana sales in North America and Europe are flat and down, respectively. And it said that "[s]ourcing costs ... along with significant increases in industry and other product supply costs, continue to [affect its] results."
So the same trends of higher fuel costs that have served ExxonMobil
The news hurt not just Chiquita but also archrival Fresh Del Monte
Management set about fixing the problem this morning. It began by clarifying that the significant loss anticipated in Q3 2008 is expected to be in line with the loss in Q3 2007 -- about $0.66 per share. Investors appear to have interpreted this clarification, combined with management's reassurance that 2008 will show "much better performance" when compared with 2007, as a green light to pile back into the stock.
I think that's a mistake, and here's why. Take Q3's anticipated loss, add Q1's already-booked profit, and the company will have earned about a nickel toward analysts' target of $2.31 per share this year. Now, Chiquita says Q2 results will be strong and further predicts a "more normal fourth quarter." That Chiquita "normally" loses money in its fiscal fourth quarters still tells me that there's a sizeable risk that Chiquita will miss estimates badly this year.
Chiquita dropped a banana peel yesterday. It tried to clean up the mess this morning, but it could still slip again. You don't want to be standing anywhere nearby when Chiquita falls.
For more fruity commentary on Chiquita and its friends, read: