Is Dean Foods (DF) Likely to Beat Q2 Earnings Estimates?

We expect Dean Foods Company DF to beat expectations when it reports second-quarter 2015 results on Aug 10.

Why a Likely Positive Surprise?

Our proven model shows that Dean Foods is likely to beat earnings because it has the right combination of the two key ingredients.

Zacks ESP: Dean Foods currently has an Earnings ESP of +3.85%. This is because the Most Accurate estimate of 27 cents stands above the Zacks Consensus Estimate of 26 cents.

Zacks Rank: Dean Foods carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Dean Foods’ Zacks Rank #2 and positive ESP make us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

Dean Foods recorded better-than-expected earnings in the previous quarter, backed by improvement in the commodity market, lower raw milk costs and volumes, coming closer to expectations. Also, better pricing led to improved operating results for the company. Management remains impressed with the sequential progress, given Dean Foods’ solid operational and financial results. Taking cue from this strength, improved capital structure and additional benefits anticipated from its latest DailyPure brand, the company expects to consolidate its position in the dairy industry, and boost shareholder value. These factors make us optimistic about the upcoming results.

Assuming a low single-digit decline in volumes along with other common seasonal factors, management expects second-quarter earnings to range from 20–30 cents a share.

Other Stocks that Warrant a Look

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 this quarter:

DSW Inc. DSW has an Earnings ESP of +2.38% and a Zacks Rank #2.

Dollar Tree, Inc. DLTR has an Earnings ESP of +2.94% and a Zacks Rank #3 (Hold).

Foot Locker, Inc. FL has an Earnings ESP of +1.45% and a Zacks Rank #2.

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