Lifeway Foods' 2Q Sales Surge

Lifeway Foods Inc (LWAY - Snapshot Report), which manufactures dairy and non-dairy health food products, reported gross sales of $20.0 million in the second quarter of 2011, up 29% year over year and in line with the Zacks Consensus Sales estimate. The upside represents the company’s second consecutive quarter of robust sales.

The upside in revenue was attributable to higher sales and increased awareness for its key product Kefir and other new product lines including Bio Kefir and Frozen Kefir. Its products are also becoming increasingly popular among kids given their health benefits.

During the first quarter of 2011, the Morton Grove, Illinois-based company posted earnings of 12 cents per share in the first quarter of 2011, handily beating the Zacks Consensus Estimate of 7 cents and the year-ago quarter's earnings of 11 cents per share. The better-than-expected results were due to double-digit growth in the top line and operating margin expansion.

The company reported total revenue of $19.0 million in the first quarter, up 19.0% year over year. Operating margin expanded 40 basis points (bps) to 18.9% on the back of lower operating expenses.

Outlook

The company continues to focus on educating the customers regarding its product. Lifeway remains optimistic for fiscal 2011 and expects to witness a similar trend for the year.

The company expects to release its second quarter earnings in the third week of August. The Zacks Consensus Estimate for the second quarter is pegged at 9 cents per share, reflecting an annualized negative growth of 28.57%.

The estimates have not budged in the last 30 days, implying that the analysts do not see any near-tem catalyst. The Zacks Consensus Estimate for sales for 2011 is $79 million and EPS is 37 cents.

Lifeway currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. We are also maintaining our long-term Neutral recommendation on the stock.

One of Lifeway Foods’ primary competitors, Dean Foods Co. (DF - Analyst Report) is expected to release its second quarter earnings on August 4, 2011.

Read the full analyst report on DF

Read the full analyst report on LWAY