Fresh Del Monte surges on earnings beat, margin expansion
Gross margin nearly doubled to 10.4% as pricing discipline offsets softer revenue
Fresh Del Monte Produce shares rallied in pre-market trading Wednesday after the fruit and vegetable producer reported fourth-quarter earnings that blew past Wall Street expectations, driven by a dramatic expansion in gross margins and disciplined pricing strategy.
The Cayman Islands-based company posted adjusted earnings per share of 70 cents for the quarter ended December 26, crushing analyst estimates of 50 cents—a 40% beat that marked one of the company's strongest performances in recent years. The stock, which had already touched a new 52-week high of $40.97 the previous day, continued to show strength as investors digested the results.
The earnings surprise came despite revenue falling short of expectations, with net sales reaching $1.02 billion against a consensus forecast of $1.04 billion. However, investors focused instead on the company's improving profitability metrics. Gross profit climbed to $106 million, with gross margin expanding to 10.4% from 6.8% in the year-earlier period—a near-doubling that underscored the effectiveness of Fresh Del Monte's strategic focus on pricing discipline and product mix optimization.
The margin improvement was particularly notable given the challenging operating environment. The company reported higher distribution, production, and procurement costs in its banana segment, yet managed to offset these headwinds through higher per-unit selling prices and favorable product mix adjustments. This pricing power demonstrates the strength of Fresh Del Monte's brand portfolio and its ability to pass on cost increases to customers in an inflationary environment.
For the full fiscal year 2025, Fresh Del Monte delivered even more compelling results. Adjusted earnings per share rose 22% year-over-year to $3.68, while adjusted gross margin improved to 10.4% from 9.2% in the prior year. Net sales increased across all business segments, reaching $4.32 billion for the year, driven primarily by higher per-unit selling prices in both fresh and value-added products and banana segments.
The company strengthened its capital return program alongside the earnings beat. Fresh Del Monte's board declared a quarterly cash dividend of 30 cents per share, an increase from the previous 25 cents, payable March 27 to shareholders of record as of March 4. The dividend hike marks the company's confidence in its cash generation capabilities and signals a commitment to returning value to shareholders.
Additionally, Fresh Del Monte continued its share repurchase activity, buying back $15 million worth of stock during the fourth quarter, representing 410,409 shares. The company still has $120.2 million remaining under its authorization, providing ample capacity for future buybacks as management looks to enhance shareholder returns.
The quarter also marked completion of a strategic milestone: the divestiture of Mann Packing operations to Church Brothers Farms. The transaction, announced in October and finalized in December, allows Fresh Del Monte to sharpen its focus on core fruit and fresh-cut categories while shedding lower-margin assets. This strategic realignment should support ongoing margin expansion as the company concentrates on its most profitable business segments.
Mohammad Abu-Ghazaleh, chairman and chief executive, characterized fiscal 2025 as a year of "solid execution" supported by pricing discipline and continued demand for core categories. He highlighted improved financial flexibility and reduced debt, positioning the company for sustained investment in operations. Net cash provided by operating activities reached $245.1 million for the year, while long-term debt stood at $173 million at year-end—a manageable level given the company's cash generation capabilities.
Analysts had maintained a "Hold" rating on Fresh Del Monte ahead of earnings, with an average price target of $46 suggesting potential upside of roughly 14% from current levels. The significant earnings beat may prompt some analysts to reassess their outlook, particularly given the company's demonstrated ability to expand margins despite input cost pressures.
Looking ahead, investors will focus on Fresh Del Monte's ability to maintain pricing power amid potential economic softening, as well as its execution on the strategic initiatives following the Mann Packing divestiture. The company's conference call scheduled for 11:00 AM ET Wednesday should provide additional color on first-quarter guidance and management's outlook for fiscal 2026.
The strong fourth-quarter performance caps a year of transformation for Fresh Del Monte, positioning the century-old produce company for continued growth as it leverages its global scale and brand strength while delivering improving returns to shareholders.