After reading the latest earnings report from Del Monte Foods
Here is a company selling for 14 times earnings and its revenue guidance for fiscal 2005 (which only has six more months to run) is for 2% to 3% growth. Is that dull or what? The only way to get excited about those numbers is noting 2% is 100% higher than the 1% originally forecast.
Equally uninspiring is the earnings forecast. While raising revenue, the company lowered this year's earnings projection from $0.81 to $0.86 per share to a range of $0.76 to $0.81 a share. In light of the fact that the company earned $0.76 in 2004, earnings might be flat in 2005. Yikes, that is dull.
For those looking for a bright spot -- like a Motley Fool Income Investor tempting dividend -- think again. Del Monte borrowed over $1 billion when it acquired a number of low-growth brands from H.J. Heinz
The company can lull you to sleep with corporate fog. For example, "higher than anticipated energy and logistics costs will put pressure on our bottom-line" is followed by "we largely offset industry-wide cost pressures with carefully executed price increases." The stock is asleep, too. Up less than 10% over the past 52 weeks, it trails the performance of the S&P 500.
The company was abuzz with what it was doing with those slow-growth Heinz brands. Charlie the Tuna was back, pouch tuna sales were booming, and product line extensions look exciting. Morris the Cat was back, and he could breathe life into cat food sales. It looked like Del Monte had the formula to melt that debt monster away and start returning money to shareholders.
There are pockets of strength, but the overall performance is proved to be downright dull -- the same results J.M Smucker
Competitors ConAgra
H.J. Heinz is a Motley Fool Income Investor recommendation. See what other big-dividend-paying companies Mathew Emmert has highlighted by taking a free, no-obligation trial today.
Fool contributor W.D. Crotty does not own stock in any of the companies mentioned but did meet the original Morris the Cat (a Christmas benefit to Star-Kist employees way back when).