Dean Foods Co. (DF) processes and distributes milk, other fluid dairy products, and plant-based beverages in the United States, North America as well as Europe. Its business has two segments: Fresh Dairy Direct and The WhiteWave Foods Company. Fresh Dairy Direct processes and distributes fluid milk and other dairy products in the United States. Its product portfolio includes milk, ice cream, cultured dairy products, creamers, ice cream mix and other dairy products that sold under more than 50 familiar local and regional brands and an array of private labels. It also produces and distributes Tru Mo flavored milk. It currently operates 79 manufacturing facilities in 32 states.
The price of the stock has dropped today by more than 4% following news about its second-quarter results and the sudden departure of its chairman.
The first reason for the negative performance is the drop of net sales that fell 15.8% and this is the second time the company recorded a drop during the last five quarters. The reason is because the company kept its retail prices at a high level, despite the price of raw milk falling 33% in the last three months. The company has decided to continue with this aggressive policy and the market didn’t care about the other good results; Dean Foods reported a net profit of 28 cents, with a remarkable progress if compared with the net loss of 1 cent per share reported a year earlier. More than this, the company reported earnings per share of 33 cents, topping analysts’ estimates by 7 cents.
Chief Financial Officer Chris Bellairs said, "With volume performance coming in-line with our expectations and a generally favorable commodity environment, we delivered a fourth consecutive quarter of sequentially improving gross profit and operating income."
The second reason for the large decline today is because the company declined to give an explanation for the sudden resignation of its chairman Tom C. Davis. Investors are worried about this silence because the Securities and Exchange Commission is pushing ahead with an insider-trading case with Dean’s shares. The news comes from a New York Times report on Sunday.
The 90-year-old company is trading with a forward P/E of 17.04 and after today's drop, the price returned 12% over the last 12 months and +49% over the last 5 years.
It has profitability and growth rated 4/10 with negative returns, ROE -13.36%, ROA -3.10% and all these ratios are underperforming 84% of the other companies in the Global Packaged Foods industry, which has an average ROE of 6.70% and an average ROA of 3.28%. The company also has a weak financial strength profile rated 5/10 with a cash to debt of 0.04% that is ranked lower than 91% of its competitors.
The company is paying its shareholders a dividend yield of 1.65% with a payout ratio of 4% with a 12-month growth rate of 300%.
The main guru holding shares of the company is Paul Tudor Jones (Trades, Portfolio) with 0.03% of outstanding shares amounting to 0.01% of total assets he manages, followed by Mario Gabelli (Trades, Portfolio) with a small stake of 0.01% of shares outstanding. Manning & Napier Advisors, Inc sold its stake during the last quarter, with an impact of 0.08% on its portfolio.
