A trio of food companies was slumping Tuesday, sitting out the broad market's healthy advance, as a set of weak earnings numbers put selling pressure on Dean Foods (DF), ConAgra (CAG) and Annie's (BNNY).
In recent trading, Dallas-based dairy supplier Dean was falling 9.2% to $13.80. The drop came after the company said commodity prices would badly dent its first-quarter results, leading it to roughly break even on the bottom line, though that forecast could come in as much as 3 cents above or below there. Analysts are looking for 27 cents, according to FactSet.
Dean had an adjusted profit, before items, of 18 cents a share in the fourth quarter, matching expectations, but the outlook was the problem. While CEO Gregg Tanner made note of positives from 2013, he said in prepared remarks that his company also "faced significant challenges in the inflationary commodity environment and through competitive pressures on our business. This very challenging environment will persist for Dean Foods, particularly during the first half of 2014."
Full-year earnings will probably be 73 cents to 86 cents a share, the company predicted, well below the current $1.13 estimate.
Next up was Annie's, the Berkeley, Calif., organic food company that's fairly new to the public market, having only a couple of years of trading history. (It was, in fact, one of the strongest IPOs of 2012, with a surprise 89% pop on its first day of trade). Once again, it was a poor outlook that sent shares tumbling Tuesday, also more than 9%, to $37.99. The company said its fourth-quarter results would be hurt by "cost pressure" it tied to low wheat supplies, meaning higher expenses for its raw-food purchases.
With that being the case, profits for the year will probably be 92 cents to 93 cents a share, missing the prior guidance of earnings at the lower end of a 97-cent to $1.01 range. For the third quarter Annie's also reported, its adjusted EPS of 17 cents trailed estimates by a penny. Again though, the disappointing future view was what really derailed shares.
On the plus side — potentially — CEO John Foraker said in a press release that consumers are becoming more interested in putting "natural and organic food into their lifestyles and are demanding greater transparency in food labeling, which are important and positive trends for us." Indeed, analysts and food industry experts have been talking up this prospect broadly, and it carries to the stock market, where names such as Chipotle (CMG) are succeeding.
For the moment, shorts, who have a huge position in Annie's, were the ones celebrating. As of Jan. 15, short interest totaled 25.3% of the float, Yahoo Finance data show. The size of the total short has grown 35% in the past 11 months, according to figures from Nasdaq.com.
Lastly, at ConAgra, the company said fiscal 2014 earnings would be $2.22 to $2.25 a share, considerably below the $2.34 to $2.38 band that previously had been anticipated. Wall Street was calling for $2.34. The Omaha-based Chef Boyardee owner cited a host of trouble spots, including a low-quality potato crop and weaker volume in consumer foods. Whereas a decline of 1% to 2% was foreseen for that division in the second half of the year, it will now probably be 3% to 4%.
Among other things, assets purchased in ConAgra's Ralcorp buy will probably add 20 cents to this year's earnings, about 5 cents less than had been hoped. Lately, ConAgra was down almost 7% to $28.89. That's a significant decline for ConAgra, a stock that has only 17 larger single-day pullbacks in its nearly 30 years of market history available on FactSet.
Traders were keeping the selling to these three and sparing the rest of the industry. Hormel (HRL), Smucker (SJM) and General Mills (GIS), for instance, were staying around the flat line.