Del Monte Foods Co. (DLM), producer, distributor and marketer of branded pet products and food products, posted weaker top-line and earnings results for the first-quarter of 2011, a 13-week quarter ending on August 1, 2010.

Quarterly Details

San Francisco-based Del Monte’s earnings slipped to 29 cents from 30 cents a share in the year-ago period and missed the Zacks Consensus Estimate by 9 cents. The quarter highlights a marginal increase in marketing investment, consistent with the company’s Accelerated Growth Plan and a decline in top-line growth, offsetting savings from productivity initiatives.

For fiscal 2011, EPS from continuing operations is expected 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 1.1% to $804.6 million, compared to $813.7 million for its 13-week quarter ended August 1, 2009, reflecting a decrease in volume of 1.6%. For fiscal 2011, Del Monte expects to generate revenue growth of 1% – 3% over fiscal 2010 sales.

Segments

For the first quarter of 2011, the Consumer Products segment saw a dip in sales of 6.0% to $377.3 million. The decrease was primarily attributable to a decline in base unit volume due to declines in retail (vegetable) and non-retail channels (fruit and vegetable).

However, the Pet Products segment posted sales growth of 3.6%, driven by strong unit volume growth, pricing and new product volume.

Share Repurchase

In the earlier quarter, the company had announced the authorization of a $350 million stock repurchase program for the next three years. In fiscal 2011, the company plans to buy back shares worth approximately $100 million-$140 million. At the end of the first quarter of 2011, the company repurchased 7.1 million shares worth $100 million.

Cash Flow

Del Monte exited the quarter with cash and cash equivalents of $28.9 million and debt to capitalization ratio of 41%. The company generated $49.9 million cash flow from operating activities. Capital expenditure for the first quarter of 2011 was $18.6 million.

Zacks Rank

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