Dive Brief:
- Dean Foods reported a 1% decrease in volume to 651 million gallons year over year for the third quarter, but that total represented the company's strongest volume performance in at least four years, according to the company's earnings report Monday.
- It reported an 18% increase in adjusted net income to $33 million, from $28 million in the same period last year. Adjusted diluted earnings per share also increased to $0.37 per share from $0.30 per share in the previous year period.
- The company's measure of raw milk costs, at $15.11 per hundred-weight for the quarter, represented an about 12% sequential increase from Q2 2016 and an almost 8% decrease from the same quarter last year.
Dive Insight:
Last month, Dean Foods' stock spiked amid potential takeover rumors by Hongsheng Beverage, a subsidiary of Chinese beverage company Hangzhou Wahaha Group, which had approached Hong Kong banks about financing the takeover, sources told Financial Times. Dean Foods declined to comment on the rumors at the time, and the company provided no updates in its most recent earnings news release.
A takeover would align with the current consolidation trend in the dairy industry, which is a segment that typically sees lower margins. For Dean Foods specifically, the company has reported substantial earnings growth in recent quarters thanks in large part to lower milk costs, which could make the company an attractive target for both domestic and international acquirers.
However, those low milk costs likely won't last forever, a factor any potential investor will have to consider. Dean Foods has also struggled with top-line growth, which the company has attempted to ameliorate by investing in higher-margin products like ice cream and by uniting its white milk brands under one national brand, DairyPure.
Dean Foods also announced this past quarter that EVP and COO Ralph Scozzafava will succeed Gregg A. Tanner as the company's CEO and board member, effective Jan. 1. Tanner will stay onboard as an adviser through the annual stockholders meeting in May 2017 to ensure a smooth transition.