Dean Foods Company
) reported yet another disappointing quarter wherein high raw milk
prices dragged the company's second-quarter 2014 bottom-line
results. The company posted an adjusted loss of 14 cents per share
from continuing operations contrary to adjusted earnings of 26
cents in the year-ago comparable quarter. Moreover, adjusted loss
was wider than the Zacks Consensus Estimate of a loss of 5 cents
On a reported basis, the company posted loss of a penny from
continuing operations as against a loss of 61 cents in the year-ago
Dean Foods Company - Earnings Surprise |
Quarter in Detail
Dean Foods' adjusted net sales increased approximately 7.5% year
over year to $2,393.9 million from $2,227.5 million in the
prior-year quarter and went ahead of the Zacks Consensus Estimate
of $2,341 million. The company's market share of U.S. fluid milk
sales volume increased 20 basis points (bps) year over year to
The company reported an adjusted operating loss of $5.9 million
for the quarter as against adjusted operating income of $64.7
million in the prior-year quarter. The year-over-year decline in
operating income was primarily due to higher raw milk prices. The
raw milk cost of Class I Mover registered a year-over-year increase
of 31% and touched an all time quarterly high of $23.66 per
The company ended the quarter with cash and cash equivalents of
$59.8 million, long-term debt of $986.3 million and shareholder's
equity of $675 million. During the first half of 2014, the company
generated $25 million of net cash from continuing operations and
$28 million of free cash flow. On an adjusted basis, the company
generated about $2 million of free cash flow in the first six
months of 2014.
At the end of the reported quarter, the company's funded debt to
earnings before interest, taxes, depreciation and amortization
(EBITDA) ratio, as defined by its credit agreements, was 3.61
times, which was much lower than its maximum leverage covenant
ratio of 5.25 times. This indicates the company's adequate
financial flexibility to service its debt.
Looking at the current industry volume trends, Dean Foods
expects higher raw milk prices and weak volumes in 2014. Therefore,
the company has withdrawn its earnings guidance for 2014, for which
the company had earlier projected earnings of 60 cents
Furthermore, Dean Foods expects to report adjusted loss in the
range of 5 cents to 15 cents per share for the third-quarter of
Other Stocks Worth Considering
Currently, Dean Foods carries a Zacks Rank #4 (Sell).
Better-placed stocks in the food business include Senomyx Inc. (
), J&J Snack Foods Corp. (
) and Pinnacle Foods Inc. (
), all carrying a Zacks Rank #2 (Buy).
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DEAN FOODS CO (DF): Free Stock Analysis Report
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