Nice surprises are always a good thing. That has been the case with Dean Foods (DF), where earnings are doing better than expected thanks to pricing and cost-cutting measures.
Net sales for the first quarter totaled $3.05 billion compared to $2.96 billion during the same period in 2010, due to strong sales growth at its business unit WhiteWave-Alpro, offsetting weaker business at Fresh Dairy Direct-Morningstar, the company's other business unit.
Adjusted net income for the first quarter was $25 million, down from $43 million in the first quarter of 2010 due to the rising prices of inputs. Still, results beat even company expectations.
"Overall, the business is off to a stronger start than we had anticipated and we are somewhat encouraged as we look to the balance of the year," says Chairman and CEO Gregg Engles.
"While we have a long way to go at Fresh Dairy Direct-Morningstar, I am cautiously optimistic that the trajectory of our business is upward and that we are on a path for continued progress as we move through the balance of the year."
The first quarter falls at a weak time of the calendar for Dean Foods, sales-wise, so upward revisions are a good thing. In February, the company announced that for 2011, it expects earnings per share (EPS) to range between 55 cents and 65 cents.
By May, the company had raised fiscal 2011 guidance to between 67 cents and 75 cents per adjusted diluted share.
Upgrade pushing shares higher
Goldman Sachs has upgraded Dean Foods to buy from neutral and set a price target of $19. The stock opened sharply higher Friday on the report. Goldman said the company is likely to be able to recover margins.
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