Please ensure Javascript is enabled for purposes of website accessibility

Why Dean Foods Co's Shares Plunged 19% Today

By Travis Hoium – Aug 8, 2017 at 11:53AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Milk sales are in decline and that's bad for Dean Foods Co.

What happened

Shares of dairy company Dean Foods Co (DF) fell as much as 20.5% in trading Tuesday after reporting second-quarter earnings. At 10:55 a.m. EDT shares were still down 19.3% on the day and showed no signs of recovering.

So what

Revenue was up 4.2% to $1.93 billion in the quarter, but net income fell 47.1% to $17.6 million, or $0.19 per share. Revenue fell slightly below the $1.94 billion analysts were expecting and adjusted earnings of $0.21 per share was below the $0.31 analysts were expecting. It's the bottom-line miss that really sent shares lower on Tuesday.

Milk is being poured into a glass outdoors.

Image source: Getty Images.

Management said competitive and volume pressures are hurting the company and the negative dynamics are expected to continue throughout the year. They also lowered full-year earnings guidance from a range of $1.35 to $1.55 per share to a new range of $0.80 to $0.95 per share.

Now what

There aren't a lot of good trends to point to for Dean Foods. The USDA said that milk sales volumes were down 2.9% in 2017 through the month of May. That's putting pressure on the business and lowering prices as well. Management is eyeing more cost cutting, but with volumes on the decline there isn't a lot to like about Dean Foods' business right now. And the drop in shares may not be the last bad news for investors in this embattled stock.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Dean Foods Stock Quote
Dean Foods
DF

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.