Why Dean Foods (DF) Is Down Today

NEW YORK (TheStreet) -- Dean Foods (DF) was falling 10.2% to $13.65 on Tuesday following fourth-quarter earnings that missed analysts' expectations. It also issued guidance for 2014 below Wall Street forecasts.

Dean Foods reported fourth-quarter earnings of 18 cents a share. Analysts surveyed by Capital IQ expected earnings of 19 cents a share. Revenue fell 7% to $2.3 billion in the quarter, which was in line with analysts' estimates of $2.29 billion.

The company's share of U.S. fluid milk sales volume increased to 35.7% in the quarter, up from 34.9% in the third quarter. Dead Foods' fluid milk volumes decreased 9% year over year, however, because of the loss of business with a large retailer. Total volumes dropped 8% from the year-earlier quarter across all products.

Dean Foods expects volumes to remain weak in 2014. The company said it expects earnings of between 73 cents and 86 cents a share for2014;analysts expect earnings of $1.12 a share. 

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TheStreet Ratings team rates DEAN FOODS CO as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about its recommendation:

"We rate DEAN FOODS CO (DF) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DEAN FOODS CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DEAN FOODS CO turned its bottom line around by earning $0.44 versus -$17.20 in the prior year. This year, the market expects an improvement in earnings ($0.88 versus $0.44).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 1039.2% when compared to the same quarter one year prior, rising from $36.44 million to $415.12 million.
  • DF, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for DEAN FOODS CO is rather low; currently it is at 21.94%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 18.86% is above that of the industry average.
  • Net operating cash flow has significantly decreased to -$13.54 million or 111.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: DF Ratings Report

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