Dean Foods Company (DF), the nation’s largest dairy processor, is slated to report fourth-quarter and fiscal 2014 results on Feb 10. In the last quarter, it had posted a positive surprise of 76.9%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
We remain optimistic about the company as it has been taking strategic steps to optimize its capital allocation, and concentrating on core business activities. In the face of industry headwinds, the company is primarily focused on three controllable factors – price realization, cost productivity and volumes at high margins that will deliver appropriate returns.
However, gauging current industry volume trends, Dean Foods expects to face pressure from higher raw milk prices and weak volumes. Moreover, we believe that the inflationary commodity environment and competitive headwinds may affect the company’s quarterly performance.
Earnings Whispers?
Our proven model does not conclusively show that Dean Foods is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Dean Foods is -10.00%. This is because the Most Accurate estimate stands at 9 cents, while the Zacks Consensus Estimate is pegged at 10 cents.
Zacks Rank: Dean Foods Zacks Rank #2 (Buy) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
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.
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:
J. C. Penney Company, Inc. (JCP) has an Earnings ESP of +23.08% and a Zacks Rank #2.
Ross Stores Inc. (ROST) has an Earnings ESP of +2.70% and a Zacks Rank #2.
Dollar Tree, Inc. (DLTR) has an Earnings ESP of +0.88% and a Zacks Rank #3 (Hold).
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