Fresh produce company Fresh Del Monte (NYSE: FDP) missed Wall Street’s revenue expectations in Q1 CY2025, with sales flat year on year at $1.1 billion. Its non-GAAP profit of $0.63 per share was 2.4% above analysts’ consensus estimates.
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Fresh Del Monte Produce (FDP) Q1 CY2025 Highlights:
- Revenue: $1.1 billion vs analyst estimates of $1.12 billion (flat year on year, 1.8% miss)
- Adjusted EPS: $0.63 vs analyst estimates of $0.62 (2.4% beat)
- Adjusted EBITDA: $61.3 million vs analyst estimates of $66.3 million (5.6% margin, 7.5% miss)
- Operating Margin: 3.9%, up from 2.6% in the same quarter last year
- Free Cash Flow Margin: 3.3%, up from 0.5% in the same quarter last year
- Market Capitalization: $1.57 billion
StockStory’s Take
Fresh Del Monte's first quarter results for 2025 were shaped by a combination of steady demand in core fruit categories and a more optimized product mix. Management highlighted the strength in pineapples, fresh-cut fruit, and avocados, noting that operational discipline and vertical integration helped the company navigate ongoing global shipping disruptions. CEO Mohammad Abu-Ghazaleh pointed to continuous improvements in gross profit and margin within the Fresh and Value-Added segment, supported by higher per unit selling prices and resilient supply chain operations.
Looking ahead, management reaffirmed its focus on maintaining gross margin improvements and capitalizing on growth in the Fresh and Value-Added categories. The company plans to build on recent investments, like the acquisition of a majority stake in Ugandan avocado oil producer Avolio, to enhance its value-added portfolio and reduce waste. CFO Monica Vicente emphasized that future performance will depend on sustaining operational efficiency and responding quickly to changing market conditions, especially in the face of evolving tariffs and global economic developments.
Key Insights from Management’s Remarks
Fresh Del Monte’s management discussed how their vertically integrated supply chain and focus on category leadership helped offset headwinds in the quarter. The company also outlined recent strategic moves and the implications for future business performance.
- Category Strength in Pineapple: Management pointed to ongoing high demand for pineapples, with demand exceeding supply. This trend was attributed to both affordability compared to other fruits and growing consumer awareness of health benefits, supporting pricing and gross margin gains.
- Growth in Fresh-Cut and Avocado: The Fresh and Value-Added segment benefitted from strong market demand and higher selling prices for avocados and fresh-cut fruit in North America. Management expects avocados to remain a key driver as sourcing expands beyond Peru and Colombia.
- Operational Resilience: The vertically integrated supply chain allowed the company to avoid major shipping delays despite global disruptions, differentiating Fresh Del Monte from smaller competitors struggling with logistics.
- Expansion into Value-Added Products: The acquisition of a majority stake in Avolio, a Ugandan avocado oil producer, was highlighted as a strategic effort to convert lower-grade avocados into premium oil, supporting higher margins and waste reduction initiatives.
- Tariff and Cost Management: Management described ongoing efforts to mitigate the impact of tariffs by working closely with buyers to avoid passing full costs on to consumers, aiming to preserve demand and price competitiveness.
Drivers of Future Performance
Management believes that the company’s outlook will hinge on sustained demand for fresh produce, continued margin discipline, and successful integration of value-added product lines, while monitoring external risks such as tariffs and logistics challenges.
- Focus on Margin Expansion: Ongoing efforts to improve product mix and operational efficiencies are expected to support gross margin targets, particularly in the Fresh and Value-Added segment.
- Diversification and Value-Added Growth: Strategic investments, like the Avolio acquisition and initiatives in biofertilizers, are intended to diversify revenue streams and lift overall profitability.
- External Risk Management: The company is closely watching the impact of tariffs, currency fluctuations, and global supply chain disruptions, with a plan to adjust quickly as conditions evolve.
Top Analyst Questions
- Mitch Pinheiro (Sturdivant & Co.): Asked about demand trends in Fresh Del Monte’s categories given consumer pressures; CEO Abu-Ghazaleh replied that demand remains steady, with fresh produce viewed as a basic, affordable staple.
- Mitch Pinheiro (Sturdivant & Co.): Inquired whether logistics disruptions are affecting competitors; management responded that smaller operators are more impacted, but Fresh Del Monte’s integrated supply chain offers resilience.
- Mitch Pinheiro (Sturdivant & Co.): Questioned the handling of baseline tariffs; CEO Abu-Ghazaleh indicated costs are being mitigated collaboratively with buyers to limit consumer impact.
- Mitch Pinheiro (Sturdivant & Co.): Probed performance in the avocado category; management noted strong growth and ongoing diversification of sourcing to support long-term expansion.
- Mitch Pinheiro (Sturdivant & Co.): Asked about margin sustainability in fresh-cut fruit; management said operational efficiency and demand support stable or improving margins, with double-digit growth in guacamole highlighted.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will be monitoring (1) the integration and performance of value-added product lines such as avocado oil and fresh-cut offerings, (2) the company’s ability to sustain or further expand gross margins despite volatile logistics and tariff environments, and (3) the pace of new product rollouts and market expansion efforts. Additionally, any significant developments in global supply chain stability or regulatory changes around tariffs could significantly influence performance.
Fresh Del Monte Produce currently trades at a forward EV-to-EBITDA ratio of 8.1×. Should you load up, cash out, or stay put? Find out in our free research report.
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