We maintain our long-term Neutral recommendation on
Dean Foods Company
). Moreover, it has a Zacks Rank #3 (Hold).
Why the Reiteration?
Dean Foods is a leading processor and distributor of milk and
other dairy products in the U.S. It is also a major manufacturer
of various specialty food products. Dean Foods continues to make
headway in its efforts to achieve the lowest cost position in the
industry. The company has benefited from its constant focus on
cost-cutting measures such as the lowering of headcount across
its businesses and closure of the plant network.
This is well evident from the company's bottom-line results in
the recently concluded quarter. Dean Foods' earnings of 13 cents
per share for second-quarter 2013 came within its guidance range
and a penny ahead of the year-ago quarter figure mainly due to
effective cost management. However, the earnings fell short of
the Zacks Consensus Estimate due to lower sales and higher raw
Further, we believe that the sale of the Morningstar business
and spin-off of The WhiteWave Company has unleashed significant
shareholder value, while improving the company's focus on its
core business that will likely bolster future growth.
However, anticipating an adverse impact on margins due to
fluctuating raw milk prices, we prefer to be on the sidelines.
Raw milk prices are projected to rise in the upcoming quarters.
Furthermore, looking at the current industry volume trends, Dean
Foods expects volumes to decline more than what is expected.
Therefore, the company narrowed its earnings guidance range for
full-year 2013 to 47-53 cents per share from 45-55 cents
Other Stocks to Consider
Other stocks worth considering in the food category business
Kraft Foods Group, Inc.
Boulder Brands, Inc.
Dole Food Company Inc.
). All of these carry a Zacks Rank #2 (Buy).
BOULDER BRANDS (BDBD): Free Stock Analysis
DEAN FOODS CO (DF): Free Stock Analysis
DOLE FOOD CO (DOLE): Free Stock Analysis
KRAFT FOODS GRP (KRFT): Free Stock Analysis
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