Wimm-Bill-Dann Beats EPS - Analyst Blog

Moscow-based Wimm-Bill-Dann Foods OJSC (WBD) posted third quarter fiscal 2010 earnings of 56 cents, surpassing the Zacks breakeven estimate. The better-than-expected results were driven by growth in the top line. However, the net income of the company plunged 52.7% year over year as costs increased following a big hike in raw-milk prices.

The Russian dairy and juice company said its total revenue climbed 22.3% year over year to $640.9 million driven by strong performance across all the segments. Segment-wise, revenues increased 23.8% to $456.4 million for Dairy, 17.7% to $110.1 million for Beverages and 20.2% to $74.4 million for Baby Food on a year-over-year basis.

Gross profit grew 6.5% to $200.8 million. However, gross margin contracted 470 basis points to 31.3% as raw-milk prices increased 53.5% in the reported quarter.

Selling and distribution expenses expanded 34.4% year over year to $117.9 million. However, general and administrative expenses dropped 4.1% to $31.9 million. Operating income declined to $48.4 million from $65.3 million in the year-ago quarter.

Financial Position

Wimm-Bill-Dann ended third quarter 2010 with cash and cash equivalents of $41.2 million and shareholders' equity of $727.4 million. During the quarter, long-term loan was $360.2 million versus $286.0 million in fiscal 2009.

Our Take

The estimates have not budged in the last 7 days and the Zacks Consensus Estimates for 2010 and 2011 remain unchanged at 85 cents and $1.16, respectively. Thus, we do not expect estimates to show much movement in the coming days.

Wimm-Bill-Dann also announced this month that PepsiCo Inc (PEP), one of the world's largest food-and-beverage companies, has agreed to buy a 66% controlling stake in the company for $3.8 billion. This deal will bring tremendous growth opportunities to the company and PepsiCo will become the biggest food-and-beverage company in Russia.

Wimm-Bill-Dann currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also maintain our long-term Neutral recommendation on the stock.