Dole Food Company Inc. (NYSE:DOLE) Memo

 Important  Company  Financial  Data  

Market  Cap   954.82M   EPS  (ttm)   0.79   ROA   1.59%   Perf  Week   -­‐11.60%  

P/E   13.61   EPS  next  Y   1.37   ROE   8.21%   Perf  Month   -­‐11.96%  

Forward  P/E   7.85   EPS  next  Q   0.19   ROI   2.18%   Perf  Quarter   -­‐14.89%  

PEG   1.7   EPS  this  Y   200.63%   Shs  Outstand   88.82M   Perf  Half  Y   23.00%  

Debt/Eq   1.88   EPS  next  Y   10.48%   Shs  Float   29.04M   Perf  Year   15.22%  

LT  Debt/Eq   1.63   EPS  next  5Y   8.00%   Short  Float   51.91%   Perf  YTD   24.28%    Thesis  /  Key  Points  

Dole  Occupies  a  Strong  Position  in  the  Market  Dole   is   the   largest  producer,  marketer  and  distributor  of   fruits  and  vegetables   in   the  world.   It  boasts   the  #1  market  share  of  bananas   in  North   America,   the   #2  market   share   of   bananas   in   Europe   and   the   #2  market   share   of   pineapples   in   the  world.  Additionally,  Dole  owns  a  significant  amount  of  land,  valued  at  around  $900  million.  Approximately  $600  million  of  this  land  is  idle  and  could  be  sold.  

  Dole  Is  Refocusing  Its  Core  Business  

Recently,  Dole  announced  the  sale  of  its  Worldwide  Packaged  Food  and  Asia  Fresh  businesses  (together  “Dole  Asia”)  to  Itochu  Corporation   for   $1.68   billion.   This   decision   allows   Dole   to   refocus   on   North   America,   Europe   and   the   fresh   fruit   business.  Packaged  food  is  a  declining  product  in  North  America  and  Europe  due  to  changing  health/wellness  trends.  Additionally,  while  the  value-­‐added  nature  of  packaged  food  provides  for  higher  margins,  the  margin  gap  between  packaged  food  and  fresh  food  is  decreasing,  especially  in  North  America  and  Europe.    

Dole  Is  Improving  Its  Debt  Situation  After  the  sale  to  Itochu,  Dole  told  investors  that  it  would  use  most  of  the  proceeds  to  pay  off  and  restructure  its  significant  $1.6  billion  debt.  Additionally,  Dole  has  assured  investors  that  it  is  pursuing  debt-­‐reduction  methods  that  should  save  $50  million  a  year.   This   course   of   action   is   notably   different   from   historical   decisions   made   by   management   and   is   indicative   of   a   new  willingness  to  reward  shareholders.  

  Dole  Is  Benefiting  from  the  Aging  Population  

Baby  Boomers  are  growing  older  and  are  still  having  a  significant  effect  on  market  demand.  This  affects  Dole  insofar  as  there  is  substantial  research  to  support  the  point  that  seniors  prefer  fruit,  specifically  bananas.  Tangentially,  one  member  of  the  aging  population,   Dole’s   Chairman   David  Murdoch   (age:   89),   has   a   disproportionate   affect   on   Dole’s   operation.  Without   an   heir-­‐apparent,  Murdoch  may  resort  to  merging  with  another  company  or  selling  his  company  altogether.  Factoring  in  Dole’s  intrinsic  value,  this  could  be  a  boon  for  investors.    

Misperception   Dole  Recently  Missed  Quarterly  Estimated  

The   volatile   agricultural,   economic   and   political   conditions   surrounding   Dole’s   business   will   cause   it   to   occasionally  miss   an  estimate.  If,  however,  one  invests  for  the  long-­‐term  then  these  cycles  will  be  of  minimal  concern.    

Dole  Is  Sacrificing  Product/Geographic  Diversity  While  the  common  perception  may  be  that  decreasing  diversification  is  universally  a  bad  idea,  in  certain  situations,  it  can  be  the  optimal  choice.  Demand  for  packaged  foods  is  declining  in  its  target  regions  and  by  selling  their  assets  ahead  of  the  curve,  Dole  was  able  to  earn  a  premium  on  their  divesture.      

VAR   China/Philippines  Trade  Conflict  

I  communicated  with  Heather  Jones,  an  analyst  with  BB&T  Capital  Markets,  about  her  take  on  Dole’s  transaction  with  Itochu.  She   believes   that   the   deal   was   a   wise   one   because   Dole   didn’t   give   up   anything   of   extraordinary   value.   Apparently,   China  recently  decided  to  block  Filipino  banana  imports.  Since  Dole  exports  from  this  area,  they  were  limited  in  trade  opportunities  with  Asia  anyway.  When  they  sold  the  Asian  fresh  fruit  division  to  Itochu  at  a  premium,  they  were  getting  a  real  deal  since  that  money  can  go  to  a  much  better  use  (e.g.,  by  paying  down  their  debt).    

Name:  Will  Lovell   College/School:  CLAS   Year:  2014  Clic

k to b

uy NOW

!PDF-XChange Viewer

ww

w.docu-track.com Clic

k to b

uy NOW

!PD

F-XChange Viewer

ww

w.docu-track.c

om

Dole Food Company Inc. (NYSE:DOLE) Memo How  It  Plays  Out  Dole  is  sitting  on  a  treasure-­‐trove  of  valuable  assets  and  is  running  an  ever-­‐improving  business  operation  in  an  enviable  market  position  with  one  of   the  best-­‐known  brands   in   the  world.  Assuming   they   follow  through  with  plans   to  pay  down  their  admittedly   large  debt,   I  could  foresee,  in  the  long  run,  the  stock  surpassing  its  all-­‐time  high  of  $14.87  and  going  to  around  $20.      Risks  /  What  Signs  Would  Indicate  We  Are  Wrong?  

Dole  Is  Not  Successful  in  Paying  Back  Debt   Political  or  Economic  Conditions  Permanently  Hinder  Dole  Operations   Overexposure  to  Europe  Results  in  Declining  International  Revenue  

Signposts  /  Follow-­‐Up   Company  Land  Value   Fresh  Fruit  Revenue   European  Economy   Long-­‐Term  Debt   Acquisitions/Mergers   Earnings  Per  Share  

Company  Description  DOLE  is  a  producer,  marketer  and  distributor  of  fresh  fruit  and  fresh  vegetables.  The  Company  has  two  business  segments:  fresh  fruit  and  fresh  vegetables.  The  fresh  fruit  segment  contains  operating  divisions  that  produce  and  market  fresh  fruit  to  wholesale,  retail  and  institutional  customers  worldwide.  The  fresh  vegetables  segment  produces  and  markets  fresh-­‐packed  and  value-­‐added  vegetables  and  salads  to  wholesale,  retail  and  institutional  customers,  primarily  in  North  America  and  Europe.  

Click t

o buy N

OW!PD

F-XChange Viewer

ww

w.docu-track.com Clic

k to b

uy NOW

!PD

F-XChange Viewer

ww

w.docu-track.c

om

Dole Food Company Inc. (NYSE:DOLE) Memo

Click t

o buy N

OW!PD

F-XChange Viewer

ww

w.docu-track.com Clic

k to b

uy NOW

!PD

F-XChange Viewer

ww

w.docu-track.c

om

Dole Food Company Inc. (NYSE:DOLE) Memo

 

Click t

o buy N

OW!PD

F-XChange Viewer

ww

w.docu-track.com Clic

k to b

uy NOW

!PD

F-XChange Viewer

ww

w.docu-track.c

om

Dole Food Company Inc. (NYSE:DOLE) Memo

Click t

o buy N

OW!PD

F-XChange Viewer

ww

w.docu-track.com Clic

k to b

uy NOW

!PD

F-XChange Viewer

ww

w.docu-track.c

om