We expect leading retail farm and ranch store chain, Dean Foods Company to beat expectations when it reports second-quarter 2016 results on Aug 8. Last quarter, the company had delivered a positive earnings surprise of 18.4%. In fact, the bottom line has outperformed the Zacks Consensus Estimate for five straight quarters now, by an average of 22.5%.

Why a Likely Positive Surprise?

Our proven model shows that Dean Foods is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. The Most Accurate estimate stands at 39 cents and the Zacks Consensus Estimate is pegged at 38 cents. So the ensuing +2.63% ESP and the company’s Zacks Rank #1 (Strong Buy) make us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

Dean Foods’ focus on its key strategic measures, concentrated on three controllable factors – price realization, cost productivity and creating a balance between pricing and volumes, is likely to aid in delivering appropriate returns even in the face of industry headwinds. Following the preceding quarter, management remained pleased with its progress, given its solid operational and financial results that strengthened Dean Foods’ balance sheet even further.

Taking cue from this strength, focus on cost management and constant brand building initiatives, the company remains on track to consolidate its position in the dairy industry, and boost shareholder value. Also, the company expects raw milk costs to decline in second-quarter 2016, as it estimates the average Class I Mover for the quarter to come in at $13.49 per hundred-weight, representing a 7% and 15% decline on a sequential and year-over-year basis, respectively.

Considering these factors, along with the expected fall volumes, management envisions second-quarter 2016 adjusted earnings to range from 32–40 cents a share.

Stocks to Consider

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

Macy's, Inc. (M Quick QuoteM - Free Report) , slated to report earnings on Aug 11, currently has an Earnings ESP of +31.71% and a Zacks Rank #2 (Buy).

L Brands, Inc. , scheduled to report earnings on Aug 17, currently has an Earnings ESP of +8.93% and a Zacks Rank #3 (Hold).

The Gap Inc. (GPS Quick QuoteGPS - Free Report) , slated to report earnings on Aug 18, currently has an Earnings ESP of +2.13% and a Zacks Rank #3.

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