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Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

Dean Foods by Kopin Tan

Summary: Rising milk costs pressured Dean Foods' (NYSE:DF) principal dairy business, while an organic-milk surplus hit its White Wave organic/soy unit. Rising debt from a one-time $15/share dividend spooked Dean shareholders into selling down 13% this month to $31.75. But even if Dean misses its lower-end 2007 guidance of $1.72/share, $1.65 of earnings would still yield 5.2%. DF's organic division enjoys double-digit growth, but Jim Lane of TriPoint Asset Management says if Dean misses targets, and shares fell to $25, for example, then Dean's valuation would be 6.6% of earnings, attracting rivals like General Mills (NYSE:GIS) or Groupe Danone (DA) to buy out the company. Dean might be able to pass on higher milk costs to consumers and the organic glut should ease as Federal incentives encouraging organic farming fades. Regular milk product prices are trending higher, and the differentials between organic and regular dairy products are shrinking, reducing organic's appeal. Perishable milk means no inventory gets built up. Bulls see a $42 upside.

DF 1-yr. chart:

Dean Foods Investment

Related Links: 4 Dairy Stocks To WatchDean Foods: Special Dividends Not a Good SignalDean Foods' Added Debt May Put Leveraging Pressure on CEOs

Source: Dean Foods: Milk This Oversell - Barron's