Please ensure Javascript is enabled for purposes of website accessibility

Why Dean Foods Co. Shares Took a Spill

By Jeremy Bowman – Feb 11, 2014 at 4:44PM

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

Shares of the dairy maker were off as much as 11% on a weak outlook in its earnings report. Here's what you need to know:

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our thesis.

What: Shares of Dean Foods Co. (DF) were going sour today, falling as much as 11% after a disappointing fourth-quarter earnings report.

So what: The dairy maker posted adjusted earnings of $0.18 per share, a penny below estimates, while sales fell off 7% to $2.3 billion, essentially in line with estimates at $2.29 billion. Though the company's share of U.S. fluid milk sales improved from 34.9% in the third quarter to 35.7%, industrywide volumes fell 2.2% and the company's year-over-year volume sales dropped 9% due to the loss of business from a major retailer. Adjusted for that loss and another customer vertically integrating its operations, Dean's volumes declined 0.6%, better than the industry average of 1.7%, though it may be foolish to overlook disappearing customers in a declining industry.

Now what: Dean's outlook for the current year was even less encouraging, as the dairy producer said, "The consensus view of the dairy commodity outlook for 2014 appears to be more challenging than previously expected as current dairy commodity prices have moved near or beyond all-time highs." Dairy demand is falling in the U.S as consumers turn toward soy milk and other healthier alternatives, and the company last year spun off WhiteWave, the organic division that was its growth engine, so there's little reason to expect sales to increase. Add to that nearly $1 billion in debt and the recent cut in food stamps, and it's hard to see a reason that Dean shares would bounce back anytime soon.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of WhiteWave Foods. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dean Foods Stock Quote
Dean Foods

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

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