(By Mayur Pahilajani - iStockAnalyst Writer)
(New York, NY) - Two stocks were trading in opposite directions on Wall Street, but they continue to show improving outlook for the overall Consumer Staples sector: Dean Foods Co. New (NYSE: DF) and Safeway Inc. (NYSE: SWY).
Both the companies affirmed positive earnings outlook for the first quarter and all of 2009, citing improving commodity conditions.
Dallas, Texas-based Dean Foods said Thursday that lower prices for energy on dropping crude rates and declining costs of one type of milk will boost its profit in the coming months. The company’s net long-term debt was $4.49 billion at Dec. 31.
The nation's largest dairy processor by revenue said it now forecasts first-quarter adjusted earnings to be at least 41 cents per share, higher from its previous projection of 38 cents per share. The market analysts on Wall Street expect the company to report earnings of 40 cents per share.
While, its full-year adjusted profit expectations is now at least $1.55 a share, up from $1.50, citing a “strong start” to the year. This represents full year growth of at least 19 percent from the $1.30 posted in 2008. The market analysts expect 2009 net earnings of $1.56 per share.
"We expected the first quarter to be strong as the commodity environment continues to improve," Chief Financial Officer Jack Callahan said. "Most notably, the Class I Mover milk price will decline in March to $9.43 per hundredweight, which is the lowest price in recent memory. The energy complex also remains favorable."
The company said it plans to reduce expenses by $300 million over the next three to five years. Dean Foods will extend its lower conversion costs on a network of over a 100 manufacturing facilities, which were acquired over the past fifteen years.
Approximately $50 million of savings will be from across all areas of the supply chain in the WhiteWave business unit, the firm said. During the next three years, the company expects mid-single digit operating income growth at DSD Dairy business unit, which primarily consists of Dean Foods' conventional dairy operations, and high-single to low-double digit operating income growth at WhiteWave-Morningstar.
"We believe the magnitude of the savings exceeds investor expectations," J.P. Morgan analyst Terry Bivens, who has an "overweight" rating on the stock, said in a note to clients, according to Reuters.
