Danone Alone

Now that the dust has settled a bit around GroupeDanone (NYSE: DA  ) , it doesn't appear that Pepsi (NYSE: PEP  ) will make an immediate bid for this French food company. Interestingly, though, the rumors appear to have left Danone with a higher stock price.

Looking at second-quarter and first-half results -- released preliminarily in late June, with the audited results released today -- there are reasons to be optimistic about the company. First-half sales growth of 6.5% on a constant currency basis doesn't sound tremendously exciting, but it's pretty good when compared to the numbers from other food companies like Smucker (NYSE: SJM  ) , Campbell Soup (NYSE: CPB  ) , and Motley Fool Income Investor selection Unilever (NYSE: UL  ) (NYSE: UN  ) .

The rest of Danone's income statement is a bit swampier. First-half operating margin improved slightly, despite higher raw material and energy costs. Net income, though, fell 30% on a reported basis, due partly to a provision the company took for its home and office delivery (HOD) water business in the U.S. Looking at so-called underlying earnings, Danone saw growth slightly greater than 7%, or more than 9% on a per-share basis.

I think there's a decent company beneath these numbers. Results actually accelerated in the second quarter, and Danone is doing pretty well despite weakness in its core French market and throughout Europe. First-half margins improved slightly in the dairy business and more significantly in the biscuits/cereals business, and I believe Danone is getting close to a more permanent solution for its problematic U.S. HOD business.

I wasn't so keen on Danone's new valuation in the wake of the Pepsi brouhaha a few months back. But I've mulled it over since then and become a bit more comfortable with it. After all, the company's valuation isn't too unreasonable compared to the likes of Campbell or McCormick (NYSE: MKC  ) -- and I think Danone's business is doing slightly better than those two.

Further food Foolishness:

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

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