Dean Foods Co. (DF) on Thursday reported a profit for the first quarter that soared from last year, reflecting a gain on sale of the Morningstar Foods unit that helped offset flat revenues.
Looking ahead, the dairy company forecast adjusted earnings per share for the second quarter and affirmed its fiscal 2013 earnings outlook below analysts' expectations.
Gregg Tanner, chief executive officer of Dean Foods said, "Our continued focus on the fundamentals of cost, volume and price delivered a solid start to the year in the first quarter."
The latest quarter's results reflect the company's sale in January 2013 of the Morningstar business, which is now reflected in discontinued operations and the company's majority ownership interest in its consolidated subsidiary, WhiteWave Foods Co. (WWAV).
Dallas, Texas-based Dean Foods' net income for the first quarter was $492.61 million or $2.63 per share, up sharply from $37.88 million or $0.20 per share in the year-ago period.
The latest quarter's results include a gain of $491.89 million or $2.63 per share on the $1.45 billion sale of the Morning Star business to Canadian dairy products company Saputo Inc. (SAP.TO). Morningstar is the largest U.S. processor and distributor of milk, creamer, and cultured dairy products.
On a pro forma basis, adjusted net income for the quarter was $53.69 million or $0.29 per share, compared to net income of $45.81 million or $0.25 per share in the same period last year. On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.27 per share for the quarter. Analysts' estimates typically exclude one-time items.
Net sales for the quarter increased slightly to $2.88 billion from $2.87 billion in the year-ago period. On an adjusted basis, net sales in the prior year was $2.89 billion. Analysts had a consensus revenue estimate of $2.98 billion.
Total operating costs and expenses rose 1 percent from the year-ago period to $642.33 million. The latest quarter's results include impairment charges of $33.92 million.
Dean Foods' share of U.S. fluid milk sales volume during the quarter remained relatively steady at 38 percent. Industry fluid milk volumes declined about 3.6 percent in the first quarter on an unadjusted basis, based on USDA data and company estimates.
On the same basis, Dean Foods unadjusted fluid milk volumes declined 4.1 percent on a year-over-year basis. The company estimates that more than half of the decline in its fluid milk volumes is attributable to the overlap of leap year and the quality of days in the quarter.
Looking ahead to the second quarter, Dean Foods forecasts earnings of $0.11 to $0.15 per share, excluding WhiteWave's operating results. Analysts expect the company to report earnings of $0.28 per share for the second quarter.
For fiscal 2013, the company affirmed its outlook for adjusted earnings per share between $0.45 and $0.55, excluding WhiteWave's operating results. Street expects the company to earn $1.08 per share for the year.
Tanner said, "Based on recent industry trends, and the forthcoming volume losses primarily related to a single previously disclosed RFP, we now expect volumes to decline low-to-mid single digits for the year. The dairy commodity environment looks to be a neutral factor in our forecast. Diesel, resin and sugar are expected to be modest tailwinds."
DF closed Wednesday's trading at $19.00. In Thursday's pre-market, the stock is adding $0.30 or 1.58 percent to $19.30.
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