Del Monte Foods (DLM) is scheduled to report their fiscal first quarter 2010 results before the market opens on Thursday, September 3. Based on our analysis, we at EarningsPreviews.com are expecting MDT to report better than expected results that exceed Wall Street’s consensus expectations.

Analyst Expectations

We are forecasting revenues of $773.6 million and EPS of $.05. This would represent a 7% increase in revenues from last year’s $726.2 million in the same period. The current analyst consensus estimates calls for revenues of $772.0 million and EPS of $.04. On June 11, the company provided full year 2010 EPS guidance of $.76 - $.80 on 4 – 6% sales growth.

Wall Street appears to be growing more and more optimistic about Del Monte’s earnings potential. Analyst consensus estimates are already at the high end of the company’s guidance range. The company’s portfolio of consumer products appears to be holding up quite well despite the economic challenges.

Del Monte Foods is targeting aggressive growth over the next 12 months which they expect to be primarily driving by pricing leverage. In addition, we expect the company to remain focused on streamlining their cost structure and delivering additional productivity gains.

Stock Performance

Since the beginning of 2009, Del Monte’s shares have gained over 46% and have significantly outperformed the 8% gain in the Dow Jones industrial average. Last year, MDT’s stock fell nearly 25%, but still outperformed the 34% drop in the Dow Jones industrial average.

Valuation

Shares are now trading at 13x consensus fiscal 2010 EPS estimates. This is inline with the relative valuations of their peer group. While stabilizing economic conditions are clearly a positive for Del Monte, the stock has already participated in the markets rally and likely has limited near-term upside. 

Recommendation: Hold with an $11 price target.