Shares of produce seller Chiquita Brands International Inc. tumbled on Friday after the company reported a surprise first-quarter loss and lowered its full-year revenue outlook.
The company said after the market closed Thursday that weak European banana prices hurt its performance in the first three months of the year and could not be offset by improved profit in the North American salad and banana business. Europe had its harshest winter in 30 years and shoppers there are still hurting in the weak economy, so prices fell.
Jefferies & Co. analyst Scott Mushkin warned that risk to short-term performance remains and cut his estimates, which are already below the average analyst estimate, according to Thomson Reuters, even lower.
Muskin said he had been concerned that the normal cash flows of the business have been permanently reduced. But his long-term worries have begun to ease.
"This concern seems overblown as the harshest winter in 30 years and slack demand in Europe has affected all industry participants and there does not appear to be any structural issues specific to Chiquita," he told clients in a note Friday.
Both he and Janney Capital Markets analyst Jonathan Feeney said the company will benefit from the lower tariff on banana imports in the European Union and that the company is working through its issues so long-term potential isn't affected.
Feeney raised his fiscal 2010 profit estimate for the company to $2.54 from $2.68 and his 2011 estimate to $2.84 from $2.70. He maintained a $25 price target on the stock and said cyclical swings in banana profits are not new.
"Chiquita's core earnings power is solid with salads on more profitable grounds," he wrote.
Mushkin, however, cut his full year 2010 profit expectation to $1.94 from $2.15, but boosted his 2011 estimate to $2.36 from $2.15.
Analysts on average predict earnings of $2.28 a share this year, and $2.60 a share in 2011, according to Thomson Reuters.
Shares of the company, based in Cincinnati, fell 84 cents or 5.3 percent to $15.03 in afternoon trading Friday.
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