Dean Foods Profit Tops Estimates After Milk Costs Decline

November 9, 2015 01:17 PM
 
Dean Foods Profit Tops Estimates After Milk Costs Decline

Dean Foods Co., the largest U.S. dairy processor, posted third-quarter profit and forecast earnings for the fourth quarter that both topped analysts’ estimates as it benefits from a decline in raw-milk costs.

Earnings excluding certain one-time items were 30 cents, the Dallas-based company said in a statement Monday, compared with the 24-cent average of 11 estimates compiled by Bloomberg. Earnings in the current quarter excluding certain items will be 28 cents to 38 cents a share, it said, more than the 24-cent average estimate. The shares rose 4 percent to $18.65 at 10:13 a.m. in New York.

Milk prices have been under pressure globally this year amid a supply glut. Class I Mover, a measure of raw-milk costs, averaged $16.38 per hundred-weight in the period, 30 percent lower year on year, Dean said.

“Dean Foods better-than-expected quarterly performance and strong fourth-quarter guidance highlight favorable dairy environment, as well as increasing benefits from internal initiatives, including cost savings and greater focus on the DairyPure brand,” Amit Sharma, a New York-based analyst for BMO Capital Markets Corp., said in a report.

DairyPure Sales

Dean said on a conference call with analysts that it’s projecting $2.5 billion in annual sales for its DairyPure milk, which contains no artificial growth hormones and first went on sale in May. The food-service industry may help to eventually boost sales to about $4 billion, it said.

DairyPure was introduced to fill a void in an industry dominated by regional brands and counter the growth of organic and soy- or almond-based milk substitutes. The new brand garnered a 9.6 percent market share in the four weeks through Oct. 4, possibly helping to reduce the so-called private-label milk market share to 47.4 percent from 50.1 percent a year ago, Bloomberg Intelligence analyst Ken Shea said in a report Oct. 19.

Third-quarter net income was 22 cents a share compared with a net loss of 17 cents a year earlier.

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