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As Milk Demand Wanes, Dean Foods Q4 Earnings And 2017 Outlook Leaves A Sour Taste

There’s no use crying over spilled milk, but what about selling over lower milk volumes? Shares of , the largest American dairy processor, are down more than 7% in early Thursday trading following a fourth quarter earnings report that missed profit expectations and came in light on outlook. The results are due in part to lower milk demand in the U.S.

Dean Foods reported $2.02 billion in fourth quarter revenue, a figure that was in line with Wall Street expectations but virtually unchanged compared to revenue recorded during the same time last year. This is the eighth consecutive quarter in which the dairy processor has posted no revenue growth.

Net income for the quarter came in at $32.8 million, resulting in earnings of 36 cents per share. While the per-share earnings figure was 16 cents higher than the 20 cents in per-share earnings reported in the year-ago quarter, it fell short of the 40-cent per share analyst consensus.

On a full-year basis, Dean Foods reported $7.7 billion in 2016 revenue, a decline from the $8.1 billion recorded in 2015. Full-year net income came in at $119.9 million, resulting in earnings of $1.33 per share — an improvement over the $8.5 million, 9-cent per share loss reported in 2015.

Softer milk demand isn’t Dean Foods’ only problem. Also causing a headache is a joint venture the company announced with CROPP, the largest independent organic farmer cooperative, back in November. The intent of the venture was to bring the Organic Valley brand of organic milk to retailers through Dean Foods’ selling mechanisms, processing plants and direct-to-store distribution mechanisms; the goal was for CROPP and Dean Foods to split ownership, governance and profit on a 50/50 basis. But for Dean Foods, that profit isn’t flowing just yet: on Thursday, the company said that the joint venture will be "minimally" accretive in 2017.

Wall Street analysts, however, were expecting first quarter earnings to come in closer to 40 cents per share. The wide variation between Dean Foods’ projection and Wall Street’s expectations drove the stock lower in Thursday’s pre-market trading session and continued to pressure shares in early Thursday trading. The stock opened down almost 5%, and is currently trading for a 7.9% decline.