DLM’s Trade Spend To Increase On Competition And Challenging Macro Environment
Analysts at Piper Jaffray reiterate their "neutral" rating on Del Monte Foods (NYSE: DLM), while reducing their estimates for the company. The target price for DLM has been reduced from $17 to $14.
Piper Jaffray says, “We believe Del Monte's branded fundamentals will sustain growth and its growth strategy is intact, but we have less confidence with respect to financial outcomes. This year's investor day held much the same message as last year's function. The company has lapped price increases and competition has stepped up the game at retail. With no pricing power and the macro environment increasingly challenging, we expect the company could enter a prolonged period of deeper trade spend. Management expects sales growth could be reduced by one-half point for FY11 with a focus on the dry cat and dry dog food businesses.”
“The macro environment has become more challenging during the past month and we are reducing estimates. We believe risk to the July quarter is measurable as growth to Pet is not expected to be noticeable and growth to Consumer Products has slipped below trend. It's fair to say that the change to our annual estimates is weighted to the July quarter,” the analysts mention.
Piper Jaffray has lowered its EPS estimates for FY11 and FY12 from $1.45 to $1.37 and from $1.55 to $1.45, respectively.
