Del Monte profit tops view
NEW YORK (Reuters) - Del Monte Foods Co (DLM.N) posted a better-than-expected quarterly profit on Wednesday and said full-year earnings could top its prior forecast, sending shares up more than 17 percent.
Earnings from continuing operations rose to $27.3 million, or 14 cents per share, in the second quarter ended on October 26, from $25.7 million, or 13 cents per share, a year earlier.
Analysts had expected a profit of 12 cents per share, according to Reuters Estimates.
Sales rose 11.5 percent to $901 million as the maker of Del Monte vegetables and Meow Mix cat food raised prices to offset higher costs and introduced new products, primarily new Meow Mix variations.
"Net sales growth reflects the fact that we are seeing the increased benefit from our pricing actions, which importantly, together with productivity actions, offset continued cost increases" in the quarter, Del Monte Chief Executive Richard Wolford said in a release.
Despite the better-than-expected results, one analyst expressed concern that Del Monte's price increases could hurt sales volume, especially as consumers become more price-conscious at the grocery store.
"They've raised prices and they've not been able to maintain volume with higher pricing increase. That tells you the strength of their brands is not sufficient to deal with higher input costs," said D.A. Davidson analyst Timothy Ramey.
Del Monte said fiscal 2009 earnings should come in toward the midpoint of a range of 58 cents to 62 cents per share, rather than toward the lower end, as it previously expected. Analysts on average expect 57 cents for the year.
Del Monte said it expected fiscal 2009 net sales to rise 8 percent to 10 percent, up from a prior forecast of 6 percent to 8 percent growth.
Del Monte shares rose 97 cents to $6.50 on the New York Stock Exchange. The stock is down 30 percent this year through Tuesday's close, compared with a 20 percent decline for the Standard & Poor's packaged foods index .15GSPFOOD.
(Reporting by Sarah Coffey and Jessica Wohl; Editing by Lisa Von Ahn, Dave Zimmerman)
