Chiquita Brands Earnings: Shrinking Margins for Fifth Consecutive Quarter

Chiquita Brands International Inc. (NYSE:CQB) reported its results for the third quarter. Chiquita Brands International and its subsidiaries operate as an international marketer and distributor of bananas and other fresh produce sold under the Chiquita and other brand.

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Chiquita Brands International Inc. Earnings Cheat Sheet

Results: Loss widened to $67 million ($1.45 per diluted share) from $28.8 million (loss of 63 cents per share) in the same quarter a year earlier.

Revenue: Fell 1.2% to $714 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Chiquita Brands International Inc. reported an adjusted net loss of 47 cents per share. By that measure, the company fell short of the mean analyst estimate of a loss of 25 cents per share. It fell short of the average revenue estimate of $768 million.

Quoting Management: “Chiquita’s third quarter results exceeded our internal expectations. While it was a challenging quarter, we made progress in positioning the company for future growth by becoming more competitive in our core banana and salads businesses,” said Edward F. Lonergan, Chiquita’s newly appointed president and chief executive officer. “Although certain fundamentals suggest that supply and demand in bananas is becoming balanced and prices are rising, we face difficult pricing comparisons to 2011, particularly with respect to the impact of euro exchange rates, which, by itself, negatively impacted year over year income comparisons by $10 million for the third quarter. In salads, our retail volume reductions as compared to the year ago periods have narrowed since the beginning of the year, and we believe that our entry into private label and additional salad products will further improve our results in 2013.” Lonergan added, “Chiquita made some difficult but necessary decisions this year prior to my arrival. Focusing on the core businesses of bananas and salads is the correct strategy for the company at this time. I am committed to the strategy and believe these decisions will benefit stakeholders in the long run. We continue to believe the long term operating income margin targets we presented earlier this year are achievable in the next 24 to 36 months, and we are already seeing improved results from the new strategy. We have seen important customer wins in both bananas and salads, and most of the restructuring activities are already complete.”

Key Stats:

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 1.5 percentage points from the year-earlier quarter to 9.9%. In that span, margins have contracted an average of 2.8 percentage points per quarter on a year-over-year basis.

Revenue has fallen in the past four quarters. Revenue declined 4.3% to $833.2 million in the second quarter. The figure fell 3.8% in the first quarter from the year earlier and dropped 6.6% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now come in under analyst forecasts for three quarters in a row. It missed the mark by 9 cents in the second quarter and by 36 cents in the first quarter.

Last quarter, the company reported a net loss that marked a turn from the previous quarter’s profit. In the first quarter, the company booked a profit of $11.1 million, or 24 cents per share.

Looking Forward: Analysts seem more negative about the company’s results for the next quarter than a month ago. The average estimate for the fourth quarter has moved from a loss of 16 cents a share to a loss of 18 cents over the last thirty days. For the fiscal year, the average estimate has moved from a loss of 13 cents a share to a loss of 17 cents over the last thirty days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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