UPDATE: Morgan Stanley Initiates Dean Foods at Overweight on Stable 2013 Outlook

Morgan Stanley initiated coverage on Dean Foods

with an Overweight rating and a $22 price target. Morgan Stanley noted, "Inflation and private label (P/L) pricing ― the two risk factors to which Dean's Fresh Dairy Direct (FDD) profitability is most susceptible ― appear manageable near term. We expect Class I milk pricing to peak in December 2012 and average $18-19/cwt in 2013 (up ~5% YoY, with lower production supporting higher prices). In addition, P/L margins remain above the value-destructive levels seen at points in 2010-11, mitigating prospects for outsized margin erosion." Dean Foods closed at $16.46 on Thursday.