Dean Foods Company (DF) seems to be on a roll, backed by its solid financial status, better-than-expected third-quarter 2014 results and ongoing strategic initiatives, all underscoring its inherent strength.
Driven by these factors, this Zacks Rank #2 (Buy) company hit a 52-week high of $19.74 yesterday, before eventually closing at $19.56. Moreover, the stock has witnessed year-over-year growth of 13.6%.
In the last concluded quarter, the company posted an adjusted loss of 3 cents per share from continuing operations that fared better than the Zacks Consensus Estimate of a loss of 12 cents. Also, the company’s net sales of $2,373.3 million came ahead of the Zacks Consensus Estimate of $2,335 million.
Apart from delivering better-than-expected results in the third quarter, Dean Foods enjoys a solid financial status. During the first three quarters of 2014, the company generated $48.1 million of net cash from continuing operations. Moreover, its regular dividend payments and recent senior notes redemption further underscore its commitment toward enhancing shareholder value.
Moving onto its growth plans, Dean Foods has been taking strategic steps to optimize its capital allocation and concentrate on core business activities. In the face of industry headwinds, the company remains primarily focused on three controllable factors – price realization, cost productivity and volumes at high margins that will deliver appropriate returns.
The company has benefited from its constant focus on cost-reduction initiatives, such as lowering of headcounts across businesses and the closure of its plant network. In third-quarter 2014, the company successfully achieved its goal of closing down manufacturing units, by closing 12 plants since the launch of these measures in late 2012. With these efforts underway, Dean Foods expects to lower its per-unit production rate and distribution costs. These are likely to ultimately benefit its bottom-line results.
We believe that all the aforementioned factors speak positively about the company and hint at its growth prospects. Moreover, the company is currently trading at a forward P/E of 21.2x, a 33.5% discount to the peer group average of 31.89x.
Apart from Dean Foods, The Clorox Company (CLX), Campbell Soup Company (CPB) and Church & Dwight Co. Inc. (CHD), hit 52-week highs of $110.16, $47.45 and $83.40, respectively, on Jan 22, 2015.
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