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Dean Foods (DF) Swings To 4Q Profit, Beat Estimates

 February 13, 2013 09:09 AM

(By Balaseshan) Dean Foods Co. (NYSE: DF) swung to a quarterly profit on strong sales growth at WhiteWave-Alpro segment and higher commodity costs at Fresh Dairy Direct. Results exceeded Street's expectations.

Adjusted earnings per share (EPS) surged 48 percent to 40 cents from 27 cents, beating market expectations of 30 cents. Reported earnings were $37.01 million, compared with a loss of $10 million in the same period last year.

The Dallas, Texas-based company's net sales rose 3.8 percent to $3.04 billion, while adjusted sales increased to $3.42 billion from $3.30 billion, more than consensus estimate of $3.37 billion for the fourth quarter. The pass-through of higher commodity costs at Fresh Dairy Direct and strong sales growth at WhiteWave helped in the sales growth, the company said.

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The pass-through of higher year-over-year commodity costs resulted in Fresh Dairy Direct net sales of $2.42 billion, a 1.5 percent increase from $2.39 billion in the previous year quarter.

The latest quarter average Class I Mover, a measure of raw milk costs, was $20.32 per hundred-weight, an increase of 8 percent from last year, and 23 percent above the third quarter 2012 level.

On October 31, 2012, the WhiteWave Foods Co., formerly an unit of Dean Foods, that owns the business comprising Dean Foods' WhiteWave-Alpro segment, completed its initial public offering of 23 million shares of its Class A common stock at $17.00 apiece.

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On Wednesday, Dean Foods affirmed its intention to effect a tax-free spin-off of shares of The WhiteWave Foods in May, following the April 23, 2013 expiration of its IPO lock-up period. The company also plans to retain up to 19.9 percent of the outstanding WhiteWave shares, or up to 34.4 million shares, with the intention to monetize or distribute the position in a tax free manner at a later date.

Looking ahead for the first quarter, DF sees adjusted EPS between 10 cents and 15 cents, excluding WhiteWave's operating results. Including WhiteWave's results, Dean Foods' expects adjusted EPS of $0.22 to $0.27. Street analysts predict EPS of $0.30.

For the full year 2013, the company projects adjusted EPS, excluding WhiteWave's results, of $0.45 to $0.55. Including WhiteWave's adjusted earnings, EPS is predicted to be about $1.00 to $1.10 for the fiscal 2013. Analysts expect EPS of $1.28.

Dean Foods expects 2013 total fluid milk volume to decline in the low-single digits. With the completed sale of Morningstar and pending separation of WhiteWave from Dean Foods, the company anticipates consolidating the reporting of Fresh Dairy Direct and corporate in 2013.

DF shares closed Tuesday's regular session at $18.39. The stock has been trading in the 52-week range between $10.70 and $19.17.

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