The Morton Grove, Illinois-based
Lifeway Foods Inc.
) posted earnings of 13 cents per share in the second quarter of
2012, which surpassed the Zacks Consensus Estimate of 6 cents per
share. Besides, the results were also significantly ahead of the
year-ago quarter earnings of 2 cents per share. The
better-than-expected results were attributable to double-digit
top-line growth and margin expansion.
Lifeway Foods is primarily engaged in manufacturing dairy and
non-dairy health food products. The company reported gross sales of
$22.7 million in the quarter, up 14.0% year over year. The upside
in revenue was attributable to higher sales and increased customer
acceptance for its flagship product 'Kefir' as well as other
product lines including Bio Kefir and ProBugs organic Kefir for
During the quarter, gross profit expanded 46% to $8.0 million and
gross margin enhanced 900 basis points (bps) to 39%, attributed to
a 20% dip in conventional costs, the largest ingredient for the
company, partially offset by a 5% hike in the cost of milk.
Operating expense jumped 2% year over year to $4.9 million during
the quarter, due to higher general and administrative expenses
particularly related to increased investments in marketing and
advertising for brand awareness. The upside was partially offset by
a dip in selling and amortization expenses.
Operating income rose to $3.1 million as compared to $0.7 million
in the year-ago quarter, due to an upside in gross margin.
As of June 30, 2012, Lifeway Foods had cash and cash equivalents of
$2.0 million versus $1.4 million at June 30, 2011. During the
quarter, net cash provided by operating activities was up $3.3
million to $4.1 million and shareholders' equity increased $2.5
million to $37.1 million.
Although, Lifeway reported better-than-expected results, it still
continues to focus on the distribution of its Kefir line, which is
Lifeway's flagship product in both the domestic and international
markets. Management remains optimistic for 2012 and is committed to
expand and enhance business as well as shareholders' value.
Additionally, margin expansion in the reported quarter was
encouraging; however, the price of milk is expected to be a
headwind through the rest of 2012. Hence, we expect estimates to go
up in the coming days. The Zacks Consensus Estimates for 2012 and
2013 are pegged at 25 cents and 31 cents a share, respectively.
Lifeway, which competes with
Dean Foods Co.
), currently retains a Zacks #2 Rank, which translates into a
short-term Buy rating. We are also maintaining our long-term
Neutral recommendation on the stock.
DEAN FOODS CO (DF): Free Stock Analysis Report
LIFEWAY FOODS (LWAY): Free Stock Analysis
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