Dean Foods today (10 August) reported a set of mixed second-quarter results with earnings beating Wall Street forecasts but sales missing analyst estimates.
The US milk supplier pointed to profitability metrics that it said were at their highest since 2012 but the company's shares slid in the wake of the announcement – and as the market reacted to the surprise exit of the company's chairman.
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The company booked adjusted earnings per share of US$0.33 for the three months to the end of June, higher than the consensus forecast among analysts of $0.26.
On an adjusted basis, which excluded a series of one-off items, Dean Foods made net income of $33m during the quarter, against a net loss of $13m in the second quarter of 2014. Its adjusted operating income stood at $67m, versus an operating loss of $6m a year earlier.
Net sales fell 15.8% to $2.01bn. Analysts expected sales to fall year-on-year but the result was lower than the Wall Street forecast of $2.07bn. Volumes were down 3% year-on-year. The result indicated Dean Foods' pricing dropped 12.8% during the quarter, although the company held its prices relatively steady, compared to the 33% year-on-year drop in Class I raw milk costs.
CEO Gregg Tanner said: "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 utilise our scale to procure ingredients and packaging at industry leading levels, optimise our production network and reduce our logistics costs. From a commercial perspective, with the category showing signs of improvement, we continued to focus on striking the right balance between volume performance and price realisation."
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By GlobalDataBB&T Capital Markets analyst Brett Hundley said: "Dean had a very solid quarter, and likely benefited from favourable Class II conditions (ice cream and cottage cheese). Dean is also likely benefiting from internal cost savings work, in our view. Margins were very good at $0.10 a gallon – levels not seen since 2012."
Nevertheless, shares in Dean Foods were down 9.08% at $16.12 at 11:12 ET.
