Dean Foods vs B&G Foods: Next Week's Showdown

NEW YORK (TheStreet) --It's a good, old-fashioned earnings showdown between two well-known food companies, Dean Foods (DF) and B&G Foods (BGS), one of Jim Cramer's favorites.  Both companies are about the same size when it comes to market cap. That, however, is where the similarities end.

Dean Foods is a food and beverage company which processes and distributes milk, other fluid dairy products and plant-based beverages. It shares closed Thursday at $15.30 and are down nearly 11% for the year to date.

The company operates in two segments, Fresh Dairy Direct and WhiteWave Foods (WWAV), which it spun off in May to Dean's shareholders through newly created class B shares.

The spinoff, detailed in this press release, worked out well for shareholders. WhiteWave now has a market cap of over $4 billion thanks to its various brands including Land O Lakes.

Dean Foods continues to own an interest in WhiteWave but not a controlling interest. This is explained in detail on the company's Web site. The whole transaction was complicated and included a reverse stock split of Dean Foods issued common stock, which shed a large amount of intrinsic value through the spinoff.

Here's a one-year chart illustrating how the stock prices for both companies have performed since the spinoff of WhiteWave. It appears that in the final analysis, shareholders sort of broke even (but that's a topic beyond the scope of this article).

DF Chart
DF
data by YCharts


Dean Foods will step into the earnings confessional before the market opens on Tuesday. The 12 analysts who cover the company expect, on average, 19 cents in earnings per share. Sales growth and revenue for the last quarter of 2013 is projected to be nearly $2.27 billion, according to Yahoo! Finance.

EPS for the first quarter of 2014 is expected to soar from 19 cents to 28 cents. Dean Foods does not currently offer a dividend to investors. That is one of the salient reasons why I prefer B&G Foods, which will release its fourth-quarter and fiscal year 2013 financial results after the markets close on Wednesday.

B&G Foods and its subsidiaries manufacture, sell and distribute a diversified portfolio of high-quality, branded shelf-stable foods across the United States, Canada and Puerto Rico. Its products are marketed under its many recognized brands including B&M, Cream of Wheat and Maple Grove Farms. It shares closed Thursday at $31.52 and are down about 7% for the year to date.

A look at B&G's one-year stock chart is also compelling. It's abundantly clear that the trailing 12-month (TTM) Ebitda gross EPS played a large role in the share price, as did the diluted TTM EPS (orange and red lines).

BGS ChartBGS data by YCharts

The company's current annual dividend of $1.32 offers a yield-to-price of nearly 4.2%. Is it a sustainable dividend? That, in my opinion, is questionable since the payout ratio appears to be north of 140%. Shares of BGS trade at a forward (one-year) PE ratio of 18.3 in comparison to Dean Food's 13.6.

One of the biggest disparities between the two food companies is that B&G's TTM operating margin has been close to 23% while Dean's is an anemic 3.3%, this also according to Yahoo! Finance. Analysts are looking for B&G's fourth-quarter EPS to be on average about 44 cents, which would be over 37% higher than the year-ago quarter.

Sales growth and revenue is estimated to have increased by over 19% to nearly $207 million for the same quarter. On Jan. 29 the company announced it was rescheduling its earnings conference call to discuss the quarter, but gave no further information. Shareholders and interested parties will have to wait for the details Wednesday.

Cautious investors may find it prudent to wait until the beans are spilled, the actual numbers revealed and guidance for the quarter and year ahead are divulged before taking the plunge with B&G Food's stock. Or, buy some while shares are still over 16% below the 52-week high of $37.66, and buy another tranche after the financial facts are known.

At the time of publication the author had no positions in any of the companies mentioned in this article..

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.

In his role as a financial writer and editor, he specializes in unique investment strategies, growth with income stocks, overlooked investment themes, tax-advantaged themes, risk management, technologies to capture gains and reduce losses, real estate related opportunities,effective wealth preservation techniques, and the use of ETFs for diversification and asset allocation. He also follows and frequently writes about technology, health sciences, energy and resource companies. Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.

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