What Makes Dean Foods (DF) a Healthy Investment Pick?

A healthy diet is the key to good health. With widespread awareness about the importance of nutritious food that one should eat regularly, consumers are now ready to shell out extra money. How about applying the same principle for a healthy portfolio?

Here we have highlighted one such stock – Dean Foods Company DF – that can impart strength to your portfolio as it offers a healthy investment opportunity. The stock's Zacks Rank #2 (Buy) and long-term earnings growth rate of 10% underscore its sound fundamentals.

The stock appears compelling from the earnings perspective. This leading processor and distributor of milk and other dairy products outperformed the Zacks Consensus Estimate in three out of the trailing four quarters. In the preceding four quarters, Dean Foods surpassed the estimate by an average of 31.3%, including a positive surprise of 26.9% registered in the second quarter of 2015. The company's quarterly earnings of 33 cents a share beat the Zacks Consensus Estimate of 26 cents and compared favorably with a loss of 14 cents recorded in the year-ago quarter.

Following better-than-expected second-quarter results, the Zacks Consensus Estimate has been portraying an uptrend, climbing 14% and 3% to $1.06 for 2015 and $1.04 for 2016, respectively, over the past 90 days. Clearly, a positive sentiment is palpable among analysts covering the stock. Analysts believe that the momentum building around the stock is guiding toward another impressive performance in the third quarter.

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 26 cents and the Zacks Consensus Estimate is pegged at 25 cents. So the ensuing +4.00% ESP and the company's favorable rank make us reasonably confident of an earnings beat. The company is expected to report third-quarter results on Nov 9.

All these factors have set the stage right for Dean Foods, which enjoys a leading position in the food and beverage industry, backed by its strong portfolio of brands that provides a competitive advantage. The company has taken strategic steps to optimize its capital allocation and concentrate on core business activities. In the face of industry headwinds, the company's strategic measures are primarily focused on three controllable factors – price realization, cost productivity and volumes at margins that will aid in delivering appropriate returns.

Other Stocks to Consider

Investors may also consider other well-ranked stocks such as Foods, Inc. FLO, Diamond Foods, Inc. DMND and The Kroger Co. KR, all carrying a Zacks Rank #2.

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