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Weak Volumes Likely to Hurt Dean Foods (DF) in Q2 Earnings

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Dean Foods Company is slated to release second-quarter 2019 results on Aug 6. This manufacturer of dairy and other specialty food products reported a loss in the trailing three quarters, wherein it also missed the Zacks Consensus Estimate in all of them.

Let’s take a look at how things are placed ahead of the upcoming quarterly results.

Soft Volumes & High Input Costs are Worries

Dean Foods has been grappling with loss of share in U.S. fluid milk volumes for a while. Lower volumes are also being triggered by customer exits and other categorical weaknesses, which were witnessed in the first quarter.  Persistence of sluggish volumes may hurt the company’s performance in the to-be-reported quarter.

In addition to soft volumes, high input costs have exerted pressure on the company’s profits. In this context, high costs for raw milk is a prime deterrent. Management expects Class I raw milk costs to rise nearly 12% in the second quarter. Also, the company anticipates dairy commodity inflation to persist throughout 2019.  

Moreover, transitory costs associated with plant consolidation is raising the company’s cost burden. Such continued pressures are likely to dent gross margin in the upcoming quarterly results.

Although the company is committed toward productivity initiatives and cost reductions, they are yet to yield favorably and turn around performance. That said, we expect headwinds stemming from weak volumes and high costs to persist and dent results in the second quarter.

Dean Foods Company Price, Consensus and EPS Surprise



Estimates Unveils a Gloomy Picture

The Zacks Consensus Estimate is pegged at a loss of 9 cents per share for the quarter to be reported. The projection, which has widened by 3 cents in the past 30 days, compares unfavorably with earnings of 16 cents reported in the prior quarter.

Further, the consensus mark for revenues is pegged at $1,887 million, which suggests a drop of almost 3.2% from $1,951 million generated in the year-ago quarter.

Dean Foods currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

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