WhiteWave Foods (WWAV, Financial) recently revealed its first quarter results for fiscal 2015 with a 10% year-over-year growth in revenues to $911 million for the quarter, in line with the consensus estimate. Excluding the negative currency headwinds, the company would have logged 13% growth in revenues compared to the year-ago quarter. WhiteWave’s non-GAAP earnings for the quarter came in at $0.24 a share, beating the consensus estimate of $0.22 a share, while GAAP earnings inclusive of currency headwinds, hedge losses and losses in the Chinese marketplace stood at $0.19 a share, up one penny year over year. Following the results, WhiteWave shares climbed to a new 52-week high of $47.55 before dropping to $46.1 at closing bell.
Margins grow on strong revenues
WhiteWave Foods reported a robust 15% year-over-year growth in sales to $641 million in its core food and beverage business in the Americas on the back of a 10% growth in organic sales. However, the region saw a 4% decline to $140 million in its fresh foods business, owing to weather conditions during the quarter that affected fresh produce availability and consequently hurt sales. On the other hand, with the Alpro brand representing the company in Europe, WhiteWave saw a 4% year-over-year growth to $131 million in sales. On a constant currency basis, the sales growth stood at 23% year-over-year.
On the back of a robust growth, WhiteWave also saw gross margins improving to 33.9% of sales, up by a full percentage point on a year-over-year basis. Gains in gross margin were also complemented by a year-over-year drop in operating expenses, resulting in an increase in operating margins by 120 basis points to 7.7% of total sales. However, despite improvement in margins and strong revenue growth, WhiteWave saw limited improvement in net earnings, which at $33.3 million represented a mere 3% year-over-year growth. The company attributed this to the $4.1 million loss it incurred in its joint venture in China as well as hedge and interest-related losses to the tune of $12 million during the quarter.
Outlook for fiscal 2015
Following the results, WhiteWave, which competes with businesses such as Kraft Foods Group Inc. (KRFT, Financial) and Danone (DANOY, Financial) in the diversified major foods sector, also announced a revision to its fiscal 2015 guidance, despite the strong dollar. The company raised its projected EPS for FY2015 to the range of $1.10-$1.14 a share, expecting to continue in the vein of its first-quarter performance through the fiscal. Consensus estimates peg the company’s earnings for the full fiscal at $1.11 a share, while for the quarter ending June 2015, earnings are expected to come in a $0.25 a share.
Final thoughts
WhiteWave reported strong Q1 sales and estimate-beating earnings for fiscal 2015 despite negative currency headwinds. Further, the company saw 10% year-over-year growth in organic sales at a time when industry giants such as Unilever (UN, Financial) and Nestle (NSRGY, Financial) are struggling for organic sales growth in the low single digits. However, the small size of the company, which means operating margins are much lower compared to the giants, is seen as a drawback in an industry where scale as well as distribution power are key to future growth. Consequently, acquisitions are seen as the way ahead for WhiteWave. This however, does not affect the company’s near to mid-term growth prospects. Experts are looking at an average annual earnings growth rate of around 16% for WhiteWave and with a peak expected in fiscal 2017. Consequently, the WhiteWave stock currently carries a "buy" guidance.
