Dean Foods (NYSE:DF) posted 2Q earnings that were a $0.14/share loss (above the $0.06/share loss consensus), but revenues did marginally beat consensus, coming in at $2.39 billion. Shares are down 9% over the last month. Full-year 2014 EPS consensus has swung from $0.55 a month ago to a $0.22 loss today. This comes as management noted that the rest of the year will be rocky - guiding for 3Q EPS to a loss of between $0.05 and $0.15 loss, versus previous consensus of a $0.26 gain.
Since we first covered Dean Foods back in June of last year, shares are down 22%. The stock is also down 16% since our September follow-up. In September, we noted that the upside in the share price was capped. A large part of that was the success of WhiteWave (NYSE:WWAV). However, we did note that Dean Foods could become a shareholder-friendly play. It did indeed start paying a dividend, yielding a current 1.75%. But we might still be a couple years out before Dean Foods can consider any share repurchases.
Its cost reduction plans should go a long way toward boosting free cash flow and ultimately helping reduce debt - two key steps toward getting to share buybacks. During 1Q 2013, Dean Foods announced plans to reduce its manufacturing facilities by 10% to 15%, as of 2Q 2014, it had reduced facilities by 15%. A positive for reducing the volatility in earnings and boosting cash flow.
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