In the ever-difficult, commoditized business of produce, Chiquita Brands International Inc (NYSE:CQB) has been a constant player, if troubled in recent years. Margin pressure and a shift in industry trends left the company with weak financials and angry shareholders, but in the past 12 months much of that has turned around. In the midst of a restructuring and armed with a (relatively) new CEO, this company is pushing its 52-week highs but may be headed higher. Does the banana brand belong in your portfolio?
The reason is a mix between industry dynamics and company-specific ones, but heavily favoring the latter. One of the big macro factors hurting Chiquita Brands International Inc (NYSE:CQB) for years was fuel costs and pricing pressure, but both have since subsided since their most dire periods around 2010. Chiquita Brands International Inc (NYSE:CQB) itself, though, has taken substantial efforts to turn around the business. The company divested its weak assets, such as a smoothie joint venture that just wasn't working, and reinvested in its core business -- 'nanners and other produce. The restructuring plan has resulted in what management believes is $60 million per year in cost savings. Chiquita Brands International Inc (NYSE:CQB) ditched avocados and grapes and doubled down on bananas -- the space where it is the No. 1 brand in Europe.
Perhaps most important for future growth, the company rightfully put an emphasis on private-label goods. Many grocery stores have turned to private labels as a means to boost profitability while simultaneously offering consumers lower prices. Chiquita Brands International Inc (NYSE:CQB) expects that it will ship 2 million cases of private-label produce per year. Given that the stock has more than doubled from its 52-week low, though, is there still a place for investment?
Comps We have only begun to see the improvements at Chiquita. Though it's been a quick and impressive effort since 2010, I believe the real momentum lies ahead in the private-label business, and perhaps further international expansion.