Dole plc (DOLE) in Dublin, Ireland, produces, distributes, and sells fresh produce, health foods, and consumer goods internationally. The company made its NYSE debut on July 30, 2021. The IPO marked the completion of its merger with Total Produce and the establishment of the largest fresh produce company in the world. However, the stock retreated more than 9% on its stock market debut and is down 0.5% over the past five days.

DOLE plans to use  the $400 million gross proceeds from the IPO to repay debt and fund the merger costs.

As the company continues to focus on expanding its business by increasing its organic produce and taking advantage of Total Produce’s strong market presence in Europe, it is well-positioned to capitalize on the growing farm produce industry. However, COVID-19 related supply chain challenges, volatility in commodity food prices, and its substantial debt burden could limit its growth.

Here is what we think could influence DOLE’s performance in the coming months:

Potential Business Risks

The COVID-19 pandemic continues to pose a considerable risk to the fresh produce industry. The rapid spread of the highly contagious Delta variant has resulted in new restrictions across the United States and Europe. This could apply unprecedented stress on the food supply chain and cause the closure of farm production facilities. DOLE’s business could be negatively impacted by the supply chain stress.

Furthermore, risks related to adverse weather conditions, increasing raw product costs, product contamination, and servicing its substantial debt burden could adversely affect DOLE’s business.

Favorable Growth Drivers

With operations spread across the North American and European fresh fruits and vegetable markets, DOLE’s diverse product offering should allow it to reach a broad global consumer base and cater to the increasing demand all year round. In addition, sustainable consumption and growing consumer interest in  health and wellness should enable DOLE to generate  higher growth in product categories such as berries, avocados, organic produce, and value-added salads. Also,  with more than  300 products grown and sourced locally and globally from more than  30 countries and supplied in more than r 80 countries through foodservice and retail channels, its complementary business combination and balanced portfolio should position DOLE for sustainable growth.

Mixed Financials

DOLE’s pro forma net revenue came in at $2.27 billion in the first quarter, ending March 31, 2021. Its net income came in at $52.68 million, while its cash and cash equivalents stood at $200 million over this period. However, it reported $1.05 billion in long-term net debt and a non-GAAP total debt of $1.21 billion.

POWR Ratings Reflect Uncertainty

DOLE has an overall C rating, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DOLE has a D grade for Stability, indicating that the stock is more volatile than its peers.

In terms of Momentum Grade, DOLE has a D. This is in sync with its price returns over the past five days.

In addition to the grades we’ve highlighted, one can check out additional DOLE ratings for Sentiment, Growth, Quality, and Value here. DOLE is ranked #21 of 32 stocks in the D-rated Agriculture industry.

Click here to view the top-rated stocks in the Agriculture industry.

Bottom Line

As DOLE further leverages its fresh produce brand in Europe and the United States and expands its presence in attractive growth categories, it should see significant market share gains and establish itself as a premier player in the organic food market. However, its increasing debt burden and risks and uncertainties related to its business operations could limit its growth. So, we think investors should wait for the risks to subside before betting on the stock.

DOLE shares fell $0.06 (-0.39%) in premarket trading Tuesday. Year-to-date, DOLE has gained 4.48%, versus a 19.03% rise in the benchmark S&P 500 index during the same period.

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.

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