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May.01
6:37 PM ET
Friday, 1 May 2009
Cramer Credits Dean Foods Debt for Investor Opportunity

Finally, something good has come out of the credit crisis: A major food company that needs cash quickly will hold a secondary offering, Cramer said Friday, and that could raise some quick cash for you, too.

The idea of fast money make you nervous? Well, it shouldn’t, at least not in this case. Dean Foods [DF  Loading...      ()   ], maker of milk and butter among other products, has $122.8 million in debt coming due on May 15 but is unable to refinance or raise new debt to cover it. Instead, the company will issue 22.5 million new shares, plus 3.375 million more as part of an overallotment option for the offering’s underwriters. Considering the near immediate returns seen in similar offerings by Northern Trust [NTRS  Loading...      ()   ], U.S. Steel [X  Loading...      ()   ] and Textron [TXT  Loading...      ()   ] just in the past week – 7%, 13% and 6.4%, respectively – investors don’t want to miss out.

But this is more than just an equity-offering play. Cramer likes Dean Foods the company as well. The biggest concern about DF has been its debt, and the offering will take care of that. Another plus: This is aggressive cost-cutter, just like Starbucks [SBUX  Loading...      ()   ], NYSE Euronext [NYX  Loading...      ()   ], Dow Chemical [DOW  Loading...      ()   ] and International Paper [IP  Loading...      ()   ], all of which Cramer highlighted during Thursday’s show. The worker layoffs, plant closings and productivity improvements, along with volume growth, are doing wonders for the company’s margins, and the 50% drop in raw milk prices has been a big help, too. So who knows what kind of profits are in store when the economy turns up?

Dean Food took a hit on Friday after the offering announcement and because full-year guidance came in below Wall Street’s expectations. That just takes the earnings risk out of the stock, though, Cramer said. He thinks an upside surprise is a very real possibility next quarter.

Got milk? If not, then get milk, Cramer said. Subscribe to Dean Foods’ equity offering and buy this great stock at a great price.

Call Cramer: 1-800-743-CBNC

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