Will High Milk Prices Hurt Dean Foods' (DF) Earnings Again? - Analyst Blog


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Dean Foods Company ( DF ) is scheduled to report its second-quarter 2014 results on Aug 11. Last quarter, this global consumer products company posted a negative earnings surprise of approximately 350%. Let's see how things are shaping up for this announcement.

Factors Influencing the Upcoming Results

Dean Foods continues to suffer because of the high raw milk prices, which has been impacting the company's quarterly performance for quite some time now. The raw milk cost of Class I Mover registered a year-over-year increase of 22% in the last quarter and touched an all-time quarterly high of $22.38 per hundred-weight. The company has posted lower-than-expected earnings for the trailing four quarters. Further, it still expects high raw milk prices along with weak volumes in 2014.  

Therefore, the company has lowered its earnings guidance for 2014 to 60 cents per share from the earlier projected range of 73-86 cents per share. Furthermore, Dean Foods expects to report adjusted loss in the range of 2-8 cents per share for the second-quarter of 2014. Agreeing with the company's projections for weak volumes and higher prices through the rest of 2014, we expect the company's results for the second quarter to be bleak.

Earnings Whispers?

Our proven model does not conclusively project Dean Foods as likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:

Zacks ESP: ESP for Dean Foods is 0.00% since the Most Accurate estimate stands at a loss of 5 cents per share, which is in line with the Zacks Consensus Estimate.

Zacks Rank #4 (Sell): Dean Foods' Zacks Rank #4 when combined with a zero ESP makes surprise prediction unlikely. Moreover, we caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that the following stocks have the right combination of elements to post an earnings beat:

Pinnacle Foods Inc.'s ( PF ) Earnings ESP stands at +3.03% and it carries a Zacks Rank #2 (Buy).

Macy's Inc. ( M ) with an Earnings ESP of +1.16% carries a Zacks Rank #3 (Hold).

L Brands Inc. ( LB ) with an Earnings ESP of +1.64% carries a Zacks Rank #3.

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MACYS INC (M): Free Stock Analysis Report

DEAN FOODS CO (DF): Free Stock Analysis Report

PINNACLE FOODS (PF): Free Stock Analysis Report

L BRANDS INC (LB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
More Headlines for: M , DF , PF , LB

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