UPDATE 3-Dean Foods profit beats estimate, shares rally

* EPS 46 cents before items vs Wall St view 39 cents

* Sees 2009 EPS of at least $1.50

* Shares up 6 percent (Adds analyst, company comments, byline.)

By Brad Dorfman

CHICAGO, Feb 11 (Reuters) - Dean Foods Co (DF.N) posted higher-than-expected quarterly profit on Wednesday, helped by a decline in costs for energy and milk, sending the largest U.S. dairy company's shares up more than 6 percent.

Higher sales of the company's Horizon Organic milk also helped boost earnings, even as organic milk as a whole showed signs of slowing, the company said.

Horizon sales rose mainly due to higher prices. But the sales growth by the organic milk industry slowed as the price difference between organic and regular milk widened.

Dean also noted that some consumers in the conventional dairy business were seeking out lower-priced products.

"We saw continued trade down from some of our regionally branded products to private label as the economy deteriorated further," Chief Financial Officer Jack Callahan said. "In most cases this is a trade between one Dean Foods product to another, albeit generally at a reduced margin."

The company also said it expects earnings per share of at least $1.50 for 2009, reflecting a mid-teens increase. Analysts on average forecast $1.49, according to Reuters Estimates.

"We believe this guidance is conservative, but understandably so given potential price competition with private label in the milk aisle as dairy input costs fall," UBS analyst David Palmer said in a research note.

Dean Foods said fourth-quarter profit more than doubled to $66.4 million, or 42 cents a share, from $32.6 million, or 24 cents a share, a year earlier.

Excluding one-time items, Dean earned 46 cents a share. Analysts on average forecast 39 cents a share, according to Reuters Estimates.

Sales fell 4.6 percent to $3.08 billion as the company passed on lower raw milk costs to consumers. Retail dairy prices typically move in sync with commodity costs, and raw milk prices were down about 23 percent from a year ago.

Dairy volume, a measure of goods shipped that excludes currency and price fluctuations, rose 2.3 percent in the company's DSD Dairy business.

The company shipped 2.8 percent more milk, outperforming an industry that saw shipments up 0.1 percent as a whole.

Dean shares were up $1.44 at $19.75 on the New York Stock Exchange. (Editing by Steve Orlofsky and Maureen Bavdek)