This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

No Appetite for Dean Foods

NEW YORK (TheStreet) -- It's been over a year since Dean Foods (DF) announced it was selling its Morningstar Foods division to Saputo for $1.45 billion. Six months later, in May 2013, the company's board of directors agreed to spin off the company's stake in WhiteWave Foods Company (WWAV).

According to some analysts, these moves justified a higher multiple on the shares, which closed Friday at $15.08, down 12% for the year to date. It didn't take long for investors to soak up the excitement. These maneuvers positioned Dean Foods as a pure play in milk and other lower-end dairy products. The Street applauded, sending the stock soaring close to 60% in the six months that followed.

The consensus was that Dean's remaining businesses became clearer and easier to understand. Although this might have been true, management never fully outlined how the company's long-term strategy would reward investors. The way I saw it, the only real benefit management achieved was compiling the liquidity needed to service the company's massive debt and shoring up the balance sheet.

I don't want to say management's back was against the wall, but Morningstar Foods was a strong-performing asset that management would have rather kept. I'm just speculating here. These are my words -- not the company's. But the fact that Morningstar Foods specialized in extended-shelf-life products like sour cream and creamers made it hard to replace.

Besides, there aren't too many businesses, especially in the dairy industry, that are generating the cash flow and earnings before interest, taxes, depreciation, and amortization to the extent of Morningstar Farms.

Well, from there, the milk spoiled. Fast-forward one year later and Dean Foods shares are right back where they were at the beginning of 2013 -- falling 30% from its 52-week high.

The Street eventually realized that even though Dean Foods has made significant strides in its restructuring, including reducing its net debt to just $671 million in the November quarter (down from $4 billion), there are still questions about the company's operating structure. Adjusted earnings per share have been on a decline, while revenue has been flat. The 78% year-over-year decline in operating income did nothing to convince analysts that the margin situation will improve any time soon.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,982.59 +22.02 0.13%
S&P 500 1,978.91 +0.57 0.03%
NASDAQ 4,444.9090 -4.6550 -0.10%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs