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Bear of the Day: Dean Foods (DF)

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Dean Foods has missed the Zacks Consensus Estimate in each of the last two-quarters and that has led to lower earnings estimates.  The Zacks Rank focuses on earnings estimate revisions, and as those numbers move lower so does the Rank.  DF has slipped to a Zacks Rank #5 (Strong Sell) and is the Bear of the Day.

Description

Dean Foods Company is a leading processor and distributor of fresh milk and other dairy products and a leader in the specialty foods industry. The company produces a full line of company-branded and private label dairy products such as milk and milk-based beverages, ice cream, coffee creamers, half and half, whipping cream, whipped toppings, sour cream, cottage cheese, yogurt, dips, dressings and soy milk.

Earnings

As noted above, each of the last two-quarters were misses, with the company reporting earnings below the Zacks Consensus Estimate.  The December 2016 quarter saw earnings of $0.38 when $0.41 was expected.  The company also missed the top line estimate and as a result, the stock fell 9.4% in the session following the report.

The most recent quarter was reported on 5/9 and was also a miss. The company reported EPS of $0.13 when the Zacks Consensus was 4 cents higher than that.  The 23.5% negative earnings surprise came with an impressive beat on the topline of $32M or about 1.4% ahead of the estimate.  The stock was up 1.36% in the session following the report.

Estimates

Estimates for DF have been falling.  The Zacks Consensus for 2016 stood at $1.63 in January and slipped to $1.44 by April.  Following the most recent earnings, the number has tumbled down to $1.36.

Valuation

The valuation looks good right now for DF. The 13.5x forward multiple is well below the 24x industry average.  The price to book multiple of 2.8x is also well below the 4.6x industry average.  Finally price to sales at 0.2x is well below the 1.5x industry average.  This tells me that the stock is trading at a discount, so while estimates are falling the valuation looks pretty good.

 

 

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