Dean Foods Swings To Q2 Profit, Tops Estimates

(RTTNews) - Dairy company Dean Foods Co. (DF) reported Monday a profit for the second quarter compared to a loss last year, despite a sales drop on lower volumes, reflecting improved margins amid low raw milk prices.

Adjusted earnings per share topped analysts' expectations, while quarterly net sales missed their estimates. The company also provided earnings guidance for the third quarter, in line with Street view.

The company noted that financial results improved for the fourth consecutive quarter as price realization offset volume deleverage. The results also reflect the highest gross profit and per gallon operating income since 2012.

"I'm very pleased with the operational and financial performance of the business this quarter and really excited about our prospects going forward. Across our supply chain, we continued to execute our cost productivity agenda and utilize our scale to procure ingredients and packaging at industry leading levels, optimize our production network and reduce our logistics costs," CEO Gregg Tanner said in a statement.

Dallas, Texas-based Dean Foods reported net income of $26.52 million or $0.28 per share for the second quarter, compared to a net loss of $0.65 million or $0.01 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $31.75 million or $0.33 per share, compared to adjusted net loss of $12.73 million or $0.14 per share in the year-ago quarter.

On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.26 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter decreased to $2.01 billion from $2.39 billion in the same quarter last year, and missed ten Wall Street analysts' consensus estimate of $2.06 billion.

Total volume across all products declined 3 percent to 653 million gallons from last year.

Dean Foods' share of U.S. fluid milk sales volume in the second quarter declined to 35.0 percent from 35.9 percent in the prior-year quarter on an unadjusted basis, based on USDA data and company estimates.

Average Class I Mover, a measure of raw milk costs, decreased 33 percent to $15.82 per hundred-weight from a year ago.

Looking ahead to the third quarter, Dean Foods expects adjusted earnings in a range of $0.17 to $0.27 per share. Analysts expect the company to report earnings of $0.21 per share for the quarter.

The guidance assumes volume declines in the low single digits, slightly increasing raw milk costs as well as normal seasonality and other factors.

"With DairyPure, our national fresh white milk brand, and TruMoo, our national flavored milk brand, we have significant opportunity to expand our industry leadership role. Our financial results reflect improving performance trends and we have refinanced our debt and expanded our accessible liquidity which gives us significantly more financial flexibility as we move forward," Tanner added.

During the quarter, the company successfully launched DairyPure, the first and largest fresh, white milk national brand, with stepped up advertising and marketing.

DF closed Friday's regular trading session at $17.73, up $0.04 on a volume of 2.43 million shares. In the past 52-week period, the stock has been trading in a range of $12.62 to $19.74.