Given the robust execution across all business operations, Dean Foods Company (DF – Analyst Report) began 2016 on a solid note, posting better-than-expected top- and bottom-line results for the first quarter.

Notably, this quarter marked Dean Foods’ fifth straight earnings beat, along with year-over-year improvement in earnings, gross profit and adjusted operating income.

The company’s quarterly adjusted earnings of 45 cents per share surged 87.5% from 24 cents in the year-ago quarter and cruised way ahead of the Zacks Consensus Estimate of 38 cents. Sources revealed that the bottom line benefited from lower raw milk costs.

On a GAAP basis, the company’s earnings came in at 43 cents per share, as against a loss of 78 cents reported in the year-ago quarter.

Quarter in Detail

Net sales declined 8.4% year over year to $1,878.8 million, while coming slightly ahead of the Zacks Consensus Estimate of $1,877 million. Notably, this marked the company’s first sales beat after five quarters of lower-than-expected results. The year-over-year decline in the top line was due to soft volumes, which dropped 3.2% to 641 million gallons from 662 million gallons in the prior-year quarter.

However, raw milk costs improved during the reported quarter and fluid milk volumes rose on a sequential basis. As expected, the Class I Mover, which is a measure of raw milk expenses, fell 11% sequentially and 14% year over year to $14.49 per hundred-weight.

Looking ahead, management expects the average Class I Mover for the second quarter of 2016 to come in at $13.49 per hundred-weight, representing a 7% and 15% decline on a sequential and year-over-year basis, respectively. However, total volume for the second quarter is anticipated to dip in the low-single digits.

Backed by efficient cost productivity initiatives, adjusted gross profit jumped 5.4% to $504.1 million, while the adjusted operating income soared nearly 61% to $83.1 million in the first quarter.

Financial Position