Dean Foods 2Q Net Rises 31%; Co Gives Weak 3Q EPS View
Dean Foods Co.'s (DF) second-quarter profit jumped 31% as lower raw-milk and energy prices supported cost-cutting efforts.
The largest U.S. dairy processor by revenue also raised its 2009 earnings outlook by a nickel to at least $1.60 a share, though its third-quarter forecast was below Wall Street's expectations. It sees earnings, excluding items, of at least 30 cents, while the average analyst estimate, according to Thomson Reuters, was 34 cents.
Chairman and Chief Executive Gregg Engles cited continued competitive activity in fluid milk operations and a cautious view of commodity prices for the forecasts. But he said he sees Dean's businesses carrying "significant momentum" into the second half of the year, adding the company is on track to deliver "very strong full-year results."
Dean has benefited in recent months as a reversal in prices, tied to the recession and a consumer-spending pullback, comes on top of a new effort over the next several years by the company to generate $300 million in savings, mainly at Dean's conventional dairy operations.
Second-quarter profit rose to $64.1 million, or 38 cents a share, from $48.9 million, or 31 cents a share, a year ago. Shares outstanding increased 9.4% as the company sold some $450 million in stock during the quarter for debt repayment and other uses. The company had said the offering would boost its share count by 14%.
Excluding restructuring and other costs, earnings rose to 43 cents a share from 33 cents. Dean's May forecast was at least 38 cents.
Net sales fell 14% to $2.68 billion. Analysts were expecting the maker of Horizon Organic dairy products, Silk soy milk and International Delight coffee creamers to report $2.81 billion.
Gross margin climbed to 28.5% from 23.8%.
Dean's Fresh Dairy Direct operations, which include milk, posted a 9% earnings increase as volume rose and input costs fell. Sales fell on the price decline. The WhiteWave-Morningstar segment, which includes ice cream and yogurt, posted a 46% rise in earnings while sales fell 5%.
Dean last month bought the Alpro division of Belgium's Vandemoortele NV for EUR325 million ($455 million) in a move to boost its position in the global soy-foods market.
Dean shares closed Tuesday at $21.34 and were inactive premarket. The stock is up 19% this year.