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Can Productivity Plans Aid Dean Foods Counter Cost Woes?
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High cost of operations has compelled players in the food space, such as Dean Foods Company , to adhere to savings as well as productivity enhancement initiatives for staying afloat. Let’s take a look at the efforts by this renowned manufacturer as well as distributor of diary and specialty food products.
Dean Foods on Track With OPEX Plan & More
Dean Foods continues to make headway in its efforts to achieve the lowest cost position in the industry. In this respect, the company focuses on reducing unnecessary costs through enhancing efficiency and focusing on waste management improvement. In fact, under the OPEX 2020 cost productivity plan introduced in 2017, the company targets annual productivity of $80-$100 million. Along with targeted reduction in SG&A expenses, the company plans to extend the OPEX program to manufacturing and logistics operations, going forward.
In addition, the company has been progressing well with enterprise-wide cost productivity program. This productivity program mainly revolves around three major areas — enhancement of supply-chain network; optimizing spending across all key categories to ensure greater efficiency and integration of operating model along with minimizing general and administrative expenses. The company completed the initial phase of reducing the general and administrative expenses in fourth-quarter 2017 and first-quarter 2018. In second-quarter 2018, Dean Foods revealed plans to shut seven manufacturing facilities to rescale supply chain. Also, during the second quarter, this program generated significant productivity and lowered G&A expenses by about $13 million. Notably, the cost productivity program is likely to deliver an additional annual run rate savings of $150 million by 2020.
Will Efforts Offset Cost Worries?
Dean Foods is battling significant input cost inflation. Evidently, greater-than-expected increases in resin, freight and fuel expenses hurt the company’s margins and bottom line in the second quarter of 2018. Sluggish fluid milk volumes and greater mix of private label products are also marring the company’s performance, lately. Management expects such headwinds to continue plaguing the company’s performance. Notably, these hurdles combined with lowered outlook for 2018 have dented investors’ optimism in the stock. Shares of the company have lost 30.4% in the past three months compared with the industry that declined 32.1%.
Although management is committed toward alleviating these headwinds through productivity initiatives and lower usages, cost hurdles can’t be fully offset in the near term. Nevertheless, this Zacks Rank #3 (Hold) company’s robust savings efforts are likely to provide some cushion and help the company in staying afloat. In fact, such efforts along with constant product innovations, strategic partnerships and diversification efforts to move beyond milk products position the company well in the long run.
Do Consumer Staples Stocks Entice You? Check These
The Chefs' Warehouse, Inc (CHEF - Free Report) , with long-term EPS growth rate of 22%, also carries a Zacks Rank #2.
Danone (DANOY - Free Report) has long-term EPS growth rate of 8.2% and a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Can Productivity Plans Aid Dean Foods Counter Cost Woes?
High cost of operations has compelled players in the food space, such as Dean Foods Company , to adhere to savings as well as productivity enhancement initiatives for staying afloat. Let’s take a look at the efforts by this renowned manufacturer as well as distributor of diary and specialty food products.
Dean Foods on Track With OPEX Plan & More
Dean Foods continues to make headway in its efforts to achieve the lowest cost position in the industry. In this respect, the company focuses on reducing unnecessary costs through enhancing efficiency and focusing on waste management improvement. In fact, under the OPEX 2020 cost productivity plan introduced in 2017, the company targets annual productivity of $80-$100 million. Along with targeted reduction in SG&A expenses, the company plans to extend the OPEX program to manufacturing and logistics operations, going forward.
In addition, the company has been progressing well with enterprise-wide cost productivity program. This productivity program mainly revolves around three major areas — enhancement of supply-chain network; optimizing spending across all key categories to ensure greater efficiency and integration of operating model along with minimizing general and administrative expenses. The company completed the initial phase of reducing the general and administrative expenses in fourth-quarter 2017 and first-quarter 2018. In second-quarter 2018, Dean Foods revealed plans to shut seven manufacturing facilities to rescale supply chain. Also, during the second quarter, this program generated significant productivity and lowered G&A expenses by about $13 million. Notably, the cost productivity program is likely to deliver an additional annual run rate savings of $150 million by 2020.
Will Efforts Offset Cost Worries?
Dean Foods is battling significant input cost inflation. Evidently, greater-than-expected increases in resin, freight and fuel expenses hurt the company’s margins and bottom line in the second quarter of 2018. Sluggish fluid milk volumes and greater mix of private label products are also marring the company’s performance, lately. Management expects such headwinds to continue plaguing the company’s performance. Notably, these hurdles combined with lowered outlook for 2018 have dented investors’ optimism in the stock. Shares of the company have lost 30.4% in the past three months compared with the industry that declined 32.1%.
Although management is committed toward alleviating these headwinds through productivity initiatives and lower usages, cost hurdles can’t be fully offset in the near term. Nevertheless, this Zacks Rank #3 (Hold) company’s robust savings efforts are likely to provide some cushion and help the company in staying afloat. In fact, such efforts along with constant product innovations, strategic partnerships and diversification efforts to move beyond milk products position the company well in the long run.
Do Consumer Staples Stocks Entice You? Check These
Conagra Brands, Inc (CAG - Free Report) , with a Zacks Rank #2 (Buy), delivered an average positive earnings surprise of 10.8% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Chefs' Warehouse, Inc (CHEF - Free Report) , with long-term EPS growth rate of 22%, also carries a Zacks Rank #2.
Danone (DANOY - Free Report) has long-term EPS growth rate of 8.2% and a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>