Dean Foods Company
) reported adjusted earnings of 29 cents per share for the first
quarter of 2013, beating its own guidance range of 22 cents - 27
cents as well as the Zacks Consensus Estimate of 26 cents.
Dean Foods has managed to beat its own guidance range for the
consecutive quarter owing to its sustained focus on cost control
and better pricing. However, the company's quarterly earnings
fell 6.5% compared with the year-ago earnings of 31 cents per
This Zacks Rank #3 (Hold) company's adjusted earnings include
the majority ownership interest in its consolidated subsidiary,
The WhiteWave Foods Company (WWAV). Excluding the operating
results of WhiteWave, Dean Foods' adjusted earnings came in at 16
cents per share.
On a reported basis, including the gain from the sale of
Morningstar business, the company registered earnings of $2.63
per share compared with 20 cents posted in the year-ago
Quarter in Detail
Dean Foods' adjusted net sales inched down 0.5% year over year
to $2,878.8 million compared with net sales of $2,893.0 million
in the comparable prior-year quarter. As per the data from USDA
and the estimates of the company, the marginal fall in the top
line is attributable to a decline in overall industry volumes for
fluid milk. Moreover, the company's quarterly net sales remain
below the Zacks Consensus Estimate of $3,065.0 million.
Adjusted operating income for the quarter decreased 3.4% to
$115.4 million from the prior-year quarter's $119.3 million.
Consequently, Dean Foods' adjusted operating margin for the
quarter contracted 10 basis points to 4.0% compared with 4.1% in
the comparable prior-year quarter.
The company ended the quarter with cash and cash equivalents
of $76.4 million, long-term debt of $1,797.5 million and
shareholders' equity of $969.8 million. During the quarter, the
company used $100.3 million of net cash for continuing
operations, while free cash flow used in continuing operations
was $146.0 million.
Further, the company remains focused on curtailing its overall
leverage. As of the end of the first quarter, the company's
funded debt to EBITDA ratio, as defined by its credit agreements,
was 2.13 times, lower than its maximum leverage covenant ratio of
5.25 times, which suggests that the company possesses adequate
financial flexibility to service its debt.
Looking at the current industry volume trends, Dean Foods
expects volumes to decline in the low-to-mid-single-digit range
in fiscal 2013.
However, the company is focusing on efficiency and leverage
reduction to drive both operating income and earnings per share.
The company anticipates operating income to grow in the
low-to-mid single digit range. Adjusted earnings (excluding
WhiteWave's operating results) in the second quarter of fiscal
2013 are expected to be in the range of 11-15 cents per share.
For fiscal 2013, the company is anticipating adjusted earnings
between 45 cents and 55 cents per share.
Other Stocks Worth Considering
Besides Dean Foods, other stocks in the food category business
that are expected to perform well include:
J&J Snack Foods Corporation
) Earnings ESP stands at +0.90% and it carries a Zacks Rank #2
Campbell Soup Company
) has an Earnings ESP of +1.79% and a Zacks Rank #2 (Buy).
The Hain Celestial Group, Inc.
) with an Earnings ESP of +1.61%, holds a Zacks Rank #2
Our proven model shows that a company may beat earnings if it
has the right combination of two key components - Positive
Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, #2 and #3.
CAMPBELL SOUP (CPB): Free Stock Analysis
DEAN FOODS CO (DF): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
J&J SNACK FOODS (JJSF): Free Stock Analysis
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