Dean Foods Results Modest - Analyst Blog

Dean Foods (DF) reported fourth-quarter results with adjusted earning per share of 31 cents per share, which was below the Zacks Consensus Estimate of 38 cents. Earnings were also down 32.6% year-over-year.

Quarterly net sales declined 3.2% year-over-year to $3.0 billion as the company passed on lower dairy commodity costs to consumers in the form of lower prices. This was partially offset by acquisition-related growth at Fresh Dairy-Direct and WhiteWave Morningstar.

Net sales in the Fresh Dairy Direct segment declined 8.3% to $2.2 billion as the company passed some of the lower dairy commodity costs to customers, partially offset by continued volume growth. Raw milk prices were 19% lower compared to the prior-year.

Net sales at WhiteWave-Morningstar increased 7.6% to $762 million, driven by the Alpro acquisition, partially offset by the exit of a foodservice relationship in the Silk brand and the exit of some private label organic milk products in the UK. Sales of branded products at WhiteWave/Alpro grew 19% to $501 million while Morningstar sales declined by 10% to $259 million, partly due to due to the pass-through of lower dairy commodity costs and a modest volume decline.

The company improved its market share across all key areas of the branded portfolio. International Delight and Land O' Lakes brands increased in the mid-single digits, driven by the strong performance of Coffeehouse Inspirations. Silk soymilk sales and Horizon Organic milk net sales were flat year-over-year.

Gross margin for the quarter increased 133 basis points (bps) to 26.8% versus 25.5% in the prior-year quarter. The increase was primarily driven by moderate commodity costs and benefits of cost savings. The operating margin for the quarter contracted 144 bps to 4.5% compared to 6.0% in the prior-year period.

For the full year 2009, net cash provided by continuing operations totaled $659 million. Capital expenditures for the full year 2009 amounted to $268 million.

Following the earnings release, management provided guidance for fiscal 2010 and for the first quarter. Annual earnings are now expected to be in the range of $1.54 to $1.64 per share. Earnings for the first quarter are expected to be in the range of 25 cents to 30 cents per share.

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