updated 5/10/2010 4:22:32 PM ET 2010-05-10T20:22:32

Shares of Dean Foods Co. tumbled more than 28 percent after the dairy producer reported a slump in first quarter net income, citing competition that hurt milk pricing, and suspended its guidance for the year.

Shares of the Dallas-based company fell $4.16, or 28.4 percent, to close at $10.47 in more than 10 times the company's normal volume. Earlier in the session, shares set a new 52-week low of $10.36.

Standard & Poor's analyst Tom Graves lowered his opinion on shares to "Strong Sell" from "Hold" on concerns the company "is weighted toward being a commodity-type business." He cut his 12-month target price to $10 from $17, "reflecting profit disappointment, weaker outlook, and concern about price competition."

Shoppers are seeking out bargains and switching to less-expensive store-brand products as they struggle in the weak economy. That trend has retailers cutting their prices to appeal to these shoppers, which is hurting the company's margins as it's pressured to cut prices, too.

Dean Foods' net income fell 43 percent to $43.2 million, or 24 cents per share, in the first three months of the year. Last year the company earned $76.2 million, or 48 cents per share.

Adjusted earnings were 23 cents per share, and revenue rose 10 percent to $2.97 billion.

Analysts expected higher adjusted earnings of 28 cents a share on revenue of $2.93 billion, according to Thomson Reuters.

The company suspended its 2010 guidance in part because of unstable retail prices in its Fresh Dairy Direct-Morningstar division, which sells private-label milk.

It now expects adjusted earnings of 23 cents to 28 cents per share for the second quarter, which is below the 41 cents-per-share estimate of analysts polled by Thomson Reuters.

Graves lowered his full year estimate to $1.07 from $1.50, excluding special items. He said he was pleased the company announced restructuring efforts, including cutting up to 400 jobs from Fresh Dairy Direct-Morningstar. But he is still concerned about the business.

Analysts expect earnings per share of $1.54 for the fiscal year.

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