Dean Foods (DF) Beats Street’s Consensus Earnings, but Other Reasons Pull Down the Stock

Shares of Dean Foods Company (DF) plunged almost 18% in the morning session and closed down $0.52 or 2.93% to $17.21 per share in today's trading session after the company reported earnings for the company's 2015 second quarter early this morning. The company missed Wall Street's revenue expectations but reported stronger than expected earnings for the quarter.

The company is a leading U.S. dairy processor and distributor, and if we consider sales, it is greater than its follower in the fluid dairy industry.

For the company's second quarter, the largest U.S. milk processor firm reported net income of $26.5 million or $0.28 per share compared to a loss of $645,000 or $0.01 per share in the same period one year ago.

On an adjusted basis, earnings from continuing operations came in at $0.33 per share and beat analyst's consensus by $0.07. The reason behind this good performance is the improvement in costs. CEO Gregg Tanner said "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".

On the other hand, revenue for the quarter was $2.01 billion, down 15.9% from last year and missing estimates by $0.06 billion.

The company's non-executive Chairman of the Board, Tom C. Davis announced his resignation on Friday, with no reason given and with no further explanation. The SEC filing's text was: "On August 7, 2015, Tom C. Davis resigned from the Board of Directors of Dean Foods Company (the "Company"). Mr. Davis served as the Chairman of the Board of Directors and on the Company's Audit Committee, Compensation Committee and Executive Committee. Mr. Davis' resignation is effective immediately."

The abrupt resignation of a board's chairman can send shares down and this was not an exception. Mainly, investors pay attention to the risk of changing a key man regardless of the results. The new business man is challenged to improve the top line which was disappointing.

For the third quarter, the company expects earnings of $0.17-$0.27 per share while the Street's expectations were $0.21 per share on revenue of $2.08 billion. So the midpoint of this guidance is above the analyst's opinions.

Mario Gabelli, the CEO of GAMCO Investors, has upped his stake in the stock by 7.41% to 13,775 shares in the second quarter of 2015.

Shares of the company have fallen 14% in a year-to-date basis but rose 5.44% in the past 12 months.

Published on Aug 11, 2015
By Omar Venerio
Capital Markets, Derivatives and Financial Management Professor, Master in Finance and CFA candidate. I am an independent trader of stocks and options and passionate about the stock market.

Copyrighted 2016. Content published with author's permission.

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