September 11, 2018 | 11:32 AM by Jay Kunstman | jkunstman@jaguaranalytics.com

Behind The Numbers – Limoneira (LMNR) Chilean Catalyst

Limoneira, an agribusiness and real estate development company, manages 11,430 acres of land centered on the production and marketing of citrus and specialty crops. The company is one of the largest U.S. growers of lemons and avocados, as well as other specialty fruits.

Shares are falling today after reporting Q3 results after the close yesterday:

-EPS of $0.50 vs $0.55 estimate – Miss
-Revenue of $40M vs $37.27M estimate – Beat
-Total Net Revenue of $40M vs $40.4M Y/Y
-Agribusiness Revenue of $38.7M vs $39.1M Y/Y
-992,000 Cartons of Fresh Lemons Sold vs 919,000 Y/Y

While results for lemons and oranges were strong, they were offset by reduced avocado volume and pricing. As CEO Harold Edwards said, “The extreme record heat in California during July affected our avocado harvest. The timing of the heat hurt our avocados because it occurred during harvest, reducing the quality of our fruit, which reduced the price we received on the fruit by approximately 20%.”

With regards to guidance, management said that lemon pricing and volume is coming in much stronger than they previously expected, And for avocados, Limoneira continues to expect positive operating income in FY19 despite the heat wave, owing to its crop insurance.

Chilean Investment

In July, the company announced a $13M acquisition of the San Pablo ranch in La Serena, Chile. The San Pablo ranch currently includes 247 acres of producing lemons, 61 acres of producing oranges, the opportunity to immediately plant 120 acres for lemon production as well as the potential for approximately 500 acres of avocado production.

In a post-earnings note, Stifel analyst Vincent Anderson said, “We expect Limoneira’s investments overseas to be on display in FY19 as Chilean volumes take full advantage of the shortfall in the U.S. lemon crop. Additionally, management stated on its conference call that it had marketed 40% of the Argentine lemon imports into the U.S. this year.”

“Revenues from international operations currently flow through the company financials in other fresh market lemon sales, which contributed $9.4 mn T4Q but includes other items besides international revenues. Following the San Pablo acquisition, we estimate the firm has productive capacity of 500-600k ctn/yr in Chile. If Limoneira sends just half of its product to the U.S., at historical prices of around $20/ctn, Chile will contribute over $5 mn of revenue in FY19.

#LMNR
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