WhiteWave Foods Hits 52-Week High on Strong Q2

Shares of The WhiteWave Foods Company WWAV reached a 52-week high of $34.06 on Aug 15, after it reported another quarter of sales and margin outperformance on Aug 7. The company beat the Zacks Consensus Estimate for both earnings and revenues in second-quarter 2014. Moreover, the company raised its 2014 earnings per share guidance for the second time in a row.

In fact, this natural, organic and plant-based food/beverages maker has surpassed the Zacks Consensus Estimate for both earnings and revenues for four straight quarters now.

The Zacks Rank #2 (Buy) company saw earnings per share growth of 23.3% last year. We believe the company is poised well for this year, while its products enjoy strong demand due to the natural/organic food revolution. Shares of WhiteWave Foods have surged almost 49% year-to-date.

Strong Revenues and Margins

WhiteWave Foods' second-quarter adjusted earnings (excluding expected investments in a Chinese joint venture) of 23 cents beat the Zacks Consensus Estimate of 22 cents by almost 5% as well as management's expectations of 21 to 22 cents. Earnings grew 42% year over year driven by solid sales and margins.

Sales increased 36% year over year to $838 million and beat the Zacks Consensus Estimate of $817 million by 2.5%. The top-line increase was also above management's expectation of low 30% growth driven by strong organic growth and a larger contribution by Earthbound Farm (acquired in Jan 2014).

Organically (excluding Earthbound Farm), revenues grew 11% as both the North American and European businesses reported strong volumes. All the company's brands recorded solid growth in the quarter led by Silk almond milk which grew 45% in the second quarter.

Operating profits grew 53% year over year to $71 million, much higher than management's expectation of low 40%. Adjusted operating margins expanded more than 100 basis points in the quarter driven by solid top-line growth, cost leverage from increased sales and realization of supply chain savings. The company is beginning to realize the benefits from its recent capital investments, especially in Europe.

2014 Outlook Raised

Buoyed by the solid first-half results and higher accretion from the Earthbound Farms acquisition, management increased the earnings outlook for the full year, but maintained the same for sales.

Adjusted diluted earnings per share are expected between 98 cents and $1.00, much better than 95–98 cents expected earlier, excluding investments in the Chinese joint venture. The revised guidance represents growth of 33% to 36% over the full-year 2013.

Earthbound Farms is expected to benefit earnings by at least 9 cents this year, higher than 7 cents expected previously.

Management expects adjusted total operating income to grow in the low-to-mid 40% range for 2014, up from low 40% rise expected earlier, backed by strong volume growth and cost savings. Management expects a similar operating income growth rate in the third quarter.

For the full year, sales growth is still expected in the low 30% range.

For the third quarter, management expects adjusted diluted earnings per share to range within 25 to 26 cents, excluding the China joint venture costs. In the third quarter, reported sales are expected to increase around 30%, lower than the first-half growth rates, due to the seasonality in Earthbound Farm's business. Organically, however, revenues are still expected to grow in the range of 8–9% for the rest of the year.

Management also expects to increase production capacity in both North America and Europe this year to support the better-than-expected volume growth that the company has been witnessing lately.

Other Stocks to Consider

Other beverage companies that can be considered include Coca-Cola Amatil Limited (CCLAY), PepsiCo, Inc. PEP and Dr Pepper Snapple Group, Inc. DPS. All the three stocks carry a Zacks Rank #2.