You have to feel for dairy product producer Dean Foods
For the quarter, Dean's net income fell 1.7% to $28.4 million, or $0.22 a share, from $28.9 million, or $0.21 in the second quarter of 2006. An active share buyback program offset lower net income to maintain EPS, excluding discontinued operations. That wasn't enough to keep Dean's stock price up, as it fell 6.7% on Tuesday, since analysts apparently expected EPS to come in closer to $0.31.
Dallas-based Dean operates through two divisions: Its dairy group supplies a range of dairy case products, including whipping cream, dairy coffee creamers, ice cream, yogurt, cottage cheese, butter, and eggs. It also markets fruit juice and fruit-flavored drinks. The WhiteWave Foods Company's products include soy-based dairy products.
The dairy group actually ramped up revenues by 16% in the quarter, but with raw milk costs climbing 48%, the unit's operating income dipped nearly 9%. The culprits in raw milk's move included higher fuel costs, grain cost increases resulting from some corn production going to the manufacture of ethanol, and higher global milk demand. For its part, the smaller WhiteWave segment contributed 8% higher operating income in the quarter.
We're still awaiting the releases of some other big companies, including Campbell Soup
The real difficulty for Dean is that its plight probably won't reverse itself quickly. According to management, the factors that drove up raw milk prices in the June period likely will prevail for the foreseeable future. As such, new per-share guidance for the September quarter is in the $0.24 to $0.28 range versus a previously expected $0.31. For the full year, the company "may be able to hit the low end of our current guidance of $1.52 to $1.58." That, of course, also implies that it may not be able to do so.
So, while Dean has long been a solid company, and despite its shares having fallen to a level near their 52-week low, this probably isn't the time for Fools to try to milk profits from an investment in Dean shares.
To milk previous Foolishness further: