Can Chiquita Brands International Inc (CQB) Move Higher Yet?

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?

Chiquita Brands International Inc (NYSE:CQB)

REDUX HOLDINGS INC (OTCMKTS:RDXH)
In May of last year, Chiquita Brands International Inc (NYSE:CQB) took a 40% haircut in stock price when net income fell from $48 million in the year-ago quarter to just $6 million. A frustrating drop, and poorly timed given that I had recommended the stock shortly before. But my original thesis has since played out, and the stock is up more than 100% since its May lows.

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.