Market reaction to earnings
On November 9, Dean Foods (DF) reported its third quarter results for fiscal 2015. On the day of the earnings release, the stock rose up to 7% and closed at $19.25. It fell 1% and closed at $18.97 on November 10. This sudden rise in stock price of 7% breaks the recent trend of the company. The stock now trades above the volatile price range of around $17.6–$18.6 in the past one-month time frame.
Earlier, the company’s shares reacted negatively to the second quarter earnings release, falling by 3%. The stock now trades lower than where it started in 2015, apparently due to market concerns over a lack of sales volume growth. However, the stock has been following a rising trend, trading in the range of $16–$18. The stock rose by 32.6% in the last year and 18.2% over the past six months, following the strong earnings growth.
Peers and ETFs
The company has its headquarters in Dallas, Texas, and manufactures, markets, and distributes dairy case products, including fluid milk, ice cream, and cultured dairy products. Its peers in the industry include Tyson Foods (TSN), Campbell Soup (CPB), and Pilgrim’s Pride (PPC). Tyson, Campbell, and Pilgrim’s Pride closed at $45.2, $48.3, and $20.2 on November 10, respectively.
The PowerShares Dynamic Food & Beverage ETF (PBJ) invest 2.8% of its portfolio in Dean Foods. It also accounts for 2.75% and 2.72% of the Tyson Foods and Campbell Soup stocks, respectively. The PBJ ETF closed at $32.8 on November 10, and its YTD (or year-to-date) return is 7.6%. Dean Foods and Pilgrim’s Pride reported YTD returns of -6.2% and -27.1%, respectively, while Tyson and Campbell Soup reported positive YTD returns of 12.9% and 9.8%, respectively, as of November 10. The Guggenheim S&P Midcap 400 Pure Value ETF (RFV) invests 0.66% of its portfolio in the Dean Foods stock. It closed at $52.0 on November 10, and its YTD return is -4.3%.
Key highlights of 3Q15
- The net income per diluted share reported was $0.22 and adjusted net income per diluted share was $0.30 in 3Q15.
- Dairy category improvements and Dairy Pure, the largest white milk national brand, supported commercial performance.
- The company repurchased ~$53 million of their common stock, or ~3.2 million shares, at an average purchase price of $16.73 per share.
- Dean Foods announced its fourth quarter guidance for adjusted diluted earnings to be in the range of $0.28–$0.38 per share.