Dean Foods Company (DF) Tuesday reported a swing to a profit in the second quarter from last year, as the year-ago quarter was hurt by a hefty litigation settlement charge. The dairy processor's earnings for the quarter easily topped analysts' expectations, while revenues fell short of estimates.
Nevertheless, Dean Foods' shares are currently up 20 percent in extended hours, after the company lifted its earnings forecast for the full year.
Chief Executive Gregg Engles said, "We continued to build on our momentum in the second quarter, delivering strong growth across all of our operating segments. In addition to each of our businesses executing well against their stated plans, we also continued to benefit from disciplined expense control across the organization."
Sales at WhiteWave-Alpro segment rose 11 percent with operating income growth of 31 percent. Fresh Dairy Direct sales declined 10 percent, but operating income advanced 41 percent. Morningstar unit's net sales were flat, with operating income growth of 19 percent.
Dean Foods' sales dropped to $3.13 billion from $3.30 billion last year, reflecting the pass-through of lower dairy commodity. Analysts estimated revenues of $3.23 billion for the quarter.
Total cost of sales declined to $2.32 billion from $2.54 billion last year.
Texas-based Dean Foods reported a second-quarter profit of $56.2 million or $0.30 per share, compared to a loss of $50.5 million or $0.28 per share last year.
The year-ago quarter was negatively impacted by a $131 million charge related to the settlement of the Tennessee dairy farmer class action litigation.
Excluding special items, second-quarter earnings improved to $0.36 per share from $0.18 per share last year. On average, 12 analysts polled by Thomson Reuters expected earnings of $0.31 per share for the quarter. Analysts' estimates typically exclude special items.
Moving ahead, the company lifted its earnings guidance for the full year 2012 to a range of $1.18 to $1.28 per share, from its prior estimate of $1.10 to $1.20 per share. Analysts currently estimate earnings of $1.16 per share for the full year.
"Looking ahead at Q3 and the balance of the year, we expect continued strong performance across the business," said Engles.
For the third quarter, the company expects adjusted earnings of $0.25 to $0.30 per share. Analysts currently estimate earnings of $0.25 per share for the quarter.
Separately, Dean Foods said that WhiteWave Foods Company, which comprises WhiteWave-Alpro segment, has filed for an initial public offering of up to 20 percent of its common shares.
Dean Foods will use the proceeds from the IPO and the $800 to $925 million to be borrowed under a new credit facility at WhiteWave Foods Company to reduce debt.
The company's Chairman and Chief Executive Gregg Engles will take over as Chairman and CEO of WhiteWave Foods Company, while remaining Chairman of Dean Foods. Gregg Tanner, President of Fresh Dairy Direct and Chief Supply Chain Officer, will be promoted to CEO of Dean Foods.
DF closed Tuesday's trading at $12.42, up 1.64%, on the NSYE. The stock further gained 20.77% in after hours trade.
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