Dean Foods (DF) Poised to Provide Investors with USDA RDA of Profits - Barron's

Dean Foods (NYSE: DF) shares are trading down about 12% YTD as investor are fearing a tougher year ahead for the dairy king, a Barron's article reported today.

Dean is down even as Hershey (NYSE: HSY) shares are up 6%, Green Mountain Coffee Roasters (NASDAQ: GMCR) stock is up an astonishing 148%, and the broader market is up about 30%.

Deans margins are expected to be squeezed by inflation in energy and milk prices. Dean has net debt of about $4.2 billion, some of which may be refinanced in 2010 or 2011, and the economy may poo poo their fancier offerings like Horizon organic and Silk soy milk products.

Shares are trading at about 9.5x expected FY10 EPS of $1.65. The packaged food stocks average is 13.8x.

DF also has cash flow of about $2.65 per share, nixing liquidity concerns.

Dean also has a 70% market share for US soy milk and 40% in Europe. The management is also investing in the business to expand organic and soy segments.

Milk profits can shift rather quickly, and an analyst at Rady Asset Management believes that if analysts are correct then there is little downside. However, if they're right, then the upside potential is unlimited.

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