Dean Foods Co New (NYSE:DF)

Analysts didn't like the fact that revenues were down. What would one expect if the cost/sale price of milk went down? Profit was up. Well??

Deej.

stock has fallen a bit since the Whitewave announcement. Whitewave will provide huge value to investors, so I am eager to have a piece of it. Dean is also exploring a sale of its Morningstar brand, which could provide more value to investors.

The company's got a range of regional brands of staple products that may, with some diligence on the part of management, expand to national brands. It's a difficult and long term task, given how connected people are to their lifelong attachment to dairy product brands, but Dean Foods is well positioned to make it happen.

Simple business, fairly valued. I like agriculture as a theme.

Obama is president.......buy food

Premiere non-dairy brands, hedge ownership

commities gone boom

on the rise

Dean Foods will outshine the market due to outsourcing entire IT

WHY DEAN FOODS (DF) IS UNDER-VALUED:

Dean Foods is the largest packager/distributor of milk products in the United States. They also lead the market in coffee creamers with their flagship brand “International Delight”. Besides “Dean” milk, here are some other brands of theirs you may have heard of: “Silk”, “Horizon”, “Land-O-Lakes”, “Alpro”.

Over the past 3 years, dairy companies have been one the hardest hit sub-sectors of the agricultural industry. They’ve been wounded by low milk prices pending the food & commodity bubble of 2008 and the subsequent panics that spurred investor exoduses throughout the recession as well as the recovery.

Historic profit margin lows, despite steady revenues, were generated by a drawn-out unfavorable per unit ratio of CME milk valuation to the cost of production ($/gal of CME Grade III/IV : $1.60/gal). This accompanied with the dairy-sector investor exoduses, insider holding declines, share dilution (*See Fool stats - stagnant/increasing revenue w/ decreasing EPS), have brought about beyond belief under-valuation for a massive firm.

WHY INVEST IN DEAN FOODS?

Only until recently (December 2010), milk prices noticeably twitched upward for the first time after 3 years of decline. Supply is down, this may be a sure signal of the dairy sub-sector reacting to prolonged deflation.

Isn’t it strange that Dean’s revenue remains unchanged over these past 3 years despite declines in demand and pricing for milk (which accounts for more than half of their revenue)? The reason for this is because Dean has quantifiably increased sales via the expansion of their recently acquired brands like the organic milk “Horizon” and via variant introductions (i.e. flavors) for existing brands like “Silk”. Revenues have increased despite sub-par milk prices and overall lack of market equity in the dairy sector. This is a planned movement by Dean called “Whitewave-Alpro” and it is being executed successfully along with a $300 million cost-cutting program. Dean has positive earnings estimates 2011 and 2012 (*see Fool growth rates).

Sector analysis: if you read the news, you’ll notice the rate of milk production is declining (a reaction to a prolonged demand dive and negative speculation), a pharmaceutical company released a drug to combat allergies nearly 3% of children have with milk, parents are just starting to complain about increasing milk prices, the FDA and various foreign agencies blocking out supply from Japan, Goldman Sachs’ retaining of a neutral rating for DF (which means they’re probably buying shares right now).

All these are signs of impending demand during a long, strong period of negative speculation.

The only question I have is why two top executives (incl. their COO) resigned this past quarter. If you have an answer or conjecture, I’d like to know it!

Citations:

(CME Milk prices) http://www.cmegroup.com/popup/mdq2.html?code=DCH1&title=March_2011_Class_III_Milk&type=p#period=W

(Whitewave-Alpro)
http://www.whitewave.com/

(Dean Foods Quarterly Report)
http://www.deanfoods.com/our-company/investor-relations/events--presentations.aspx

Got in @ 8, nice trade so far.

the price of dairy, needed to produce their product. that and the whole euro thingy, other than that , this one will prevail

Milk costs will hurt ST profits plus this market needs a healthy correction. Dont forget debt load folks!!!!

Nice chart play. Stock is beaten down and ready to rock n' roll. Next stop $10, $11, $12.50 then $15.

healthy commodity, low priced =)

Solid company, very tough 2010...with the ecomony turning around, profits should come around also...well i hope...

Here's the buy rec:

http://www.fool.com/investing/value/2010/12/21/rising-star-buy-dean-foods.aspx

I have a good feeling for DF so gow for it !!!!