Dean Foods Co, the largest US milk processor, reported a better-than-expected profit for the third quarter as it maintained high prices despite a drop in raw milk costs. Shares of the company, which also forecast fourth-quarter adjusted earnings above analysts' expectations, rose 8 percent in premarket trading on Monday.
Dean Foods did not cut prices even though raw milk prices dropped from their peaks last year as demand from China declined and Russia banned US milk and dairy imports. The company's net sales suffered as a consequence, falling for the third straight quarter due to a 2 percent decline in volumes.
The maker of Meadow Gold and Dean's Milk said it expected volumes to decline in low single digit percent in the current quarter. Milk sales in the United States have remained low as consumers cut back consumption in 2013 and 2014 due to high prices and revival in demand is taking longer than expected, Athlos Research analyst Jonathan Feeney wrote in a pre-earnings note. Raw milk prices fell 30 percent to $16.38 per hundred-weight in the third quarter, Dean Foods said.
The company forecast adjusted earnings of 28-38 cents per share for the fourth quarter, above the average analyst estimate of 24 cents, according to Thomson Reuters I/B/E/S. Dean Foods reported net income of $20.2 million, or 22 cents per share, attributable to the company for the quarter ended September 30. The company had a net loss of $16 million, or 17 cents per share, in the same quarter last year.
Excluding items, Dean Foods earned 30 cents per share, topping analysts' expectations of 24 cents. Net sales fell 14.3 percent to $2.03 billion, missing the average analyst estimate of $2.04 billion. Dean Foods shares were trading at $19.40 before the bell.