Will Dean Foods (DF) Earnings Disappoint This Season? - Analyst Blog

Dean Foods Company DF is scheduled to report its first-quarter fiscal 2014 results on May 8. Last quarter, this global consumer products company posted a negative earnings surprise of approximately 5.26%. Let's see how things are shaping up for this announcement.

Factors Influencing the Upcoming Results

Dean Foods' fourth quarter and fiscal 2013 results disappointed at the hands of weak top line performance, owing to a decline in the overall industry volumes for fluid milk. High milk prices and a fall in Supplemental Nutrition Assistance Program benefits have led to a decline in domestic demand that is in turn impacting volumes. Agreeing with the company's projections for weak volumes through the rest of 2014, we expect the company's results for the first quarter to be bleak.

However, the company expects to benefit slightly from decline in raw milk prices from the beginning of 2014. Additionally, on the cost side, the company expects to reap the success of the cost cutting measures that were announced in the fourth quarter of fiscal 2012 by mid 2014.

Earnings Whispers?

Our proven model does not conclusively project Dean Foods as likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:
 
Zacks ESP: ESP (Expected Surprise Prediction) for Dean Foods is 0.00% since the Most Accurate estimate stands at 2 cents per share, which is in line with the Zacks Consensus Estimate.

Zacks #3 Rank (Hold): Dean Foods' Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call. We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into earnings announcement, especially when the company is undergoing negative estimate revisions.

Other Stocks to Consider

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

Treehouse Foods Inc.'s THS Earnings ESP stands at +1.25% and it carries a Zacks Rank #2 (Buy).

CST Brands Inc. CST with an Earnings ESP of +14.29% carries a Zacks Rank #3.