NEW YORK (AP) -- Shares of Dean Foods Co. advanced Friday after a Stifel analyst upgraded his rating on the dairy company, saying he believes the business is undervalued.
THE SPARK: After a meeting with the company's management, analyst Christopher Growe noted that Dean Foods is close to completing its transformation following the spinoff of most its WhiteWave organic milk business. He also noted that earnings growth should stabilize and that Dean Foods is working to improve its balance sheet. The company could also introduce a dividend payment with a 4 percent or more yield, he said.
He also noted that the dairy business could "see some consistency" through the year given stable milk prices. Growe raised his rating to "buy" from "hold."
THE BIG PICTURE: Dean Foods had announced its plans to take WhiteWave Foods Co. public this summer, with proceeds from the sale going toward paying down debt. Dean plans to keep about 20 percent of WhiteWave.
Given the flat to declining volume in the U.S. milk industry, Growe noted that cost savings will be key if Dean Foods is to achieve its operating profit growth targets. The company expects $120 million in costs savings this year and a similar level in 2014.
SHARE ACTION: Shares of Dean Foods were up 3 percent at $17.83.