ANDE Andersons Inc

While many stocks have soared so far in 2013, those in the commodity production space have had a much rougher time. Investors have shunned commodity producers by and large, as the focus has been on growth stocks, or companies in more cyclical sectors instead.

Although much of the focus has been on the metal mining space, those in the agricultural operations segment have also faced severe weakness as of late too. In particular, one company that has been weak and may continue to face resistance in this space is Fresh Del Monte Produce (FDP).

 FDP in Focus

FDP produces tropical fruit such as bananas, pineapples, but also melons and ‘deciduous’ fruit as well. This includes grapes, apples, peaches, etc. giving the firm a wide variety of production across a number of popular fruits.

While this might sound like a decent business to be in, FDP has definitely struggled as of late. This has largely been due to rising costs, and with a lack of any real competitive advantages, the pain may continue for Fresh Del Monte Produce for quite some time.

Estimates

This poor trend for FDP is best exemplified by the recent earnings history of the company. Over the past four quarters, there has only been one beat, and there have been two misses of at least 75%. This latest miss was especially ill-received by the market, as the stock plunged by nearly 10% following the news.

If this wasn’t enough, estimates have also been falling for FDP across the board. Two months ago, the consensus for the current quarter was for a loss of three cents a share, but this has now fallen to a loss of 22 cents a share. Furthermore, the current year estimates have slumped from $2.11/share two months ago, to $1.63/share today, suggesting that the outlook for FDP is not looking very good.



So with these plunging estimates Fresh Del Monte Produce is now expected to have an earnings contraction of 36% (yoy) for the current year. While the following year estimates are once again showing growth, we are very bearish on FDP, assigning this company a Zacks Rank #5 (Strong Sell).

Better Choices

Given the broad trends in the commodity world, it is tough to find good picks in the agricultural operations space. In fact, the current industry rank for the segment is in the bottom 10%, suggesting that there are plenty of better choices out there instead.

However, if you are dead-set on getting into this space, it may be a good idea to look to the Agriculture/products segment instead. This corner of the commodity world is doing much better from a  rank perspective—top 30%-- and it even has a number 1 Ranked stock, The Andersons (ANDE).

This company focuses on the grain market, as opposed to FDP’s fruit focus, and it has seen a solid history at earnings season. In fact, ANDE delivered a huge beat of nearly 50% in the latest report, and it has been seeing solid levels of estimate revisions lately too, suggesting this might be a better approach to agricultural investing, especially when compared to the struggling Fresh Del Monte Produce.

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ANDERSONS INC (ANDE): Free Stock Analysis Report
 
FRESH DEL MONTE (FDP): Free Stock Analysis Report
 
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