Market Overview

10 Reasons Why JPMorgan Turned Bearish On Dean Foods

Share:
10 Reasons Why JPMorgan Turned Bearish On Dean Foods
Related DF
21 Stocks Moving In Monday's Pre-Market Session
20 Stocks Moving In Friday's Pre-Market Session
The Bristol-Myers Celgene Deal, And Other Ideas (Seeking Alpha)

JPMorgan named multiple risks it's projecting for Dean Foods Co (NYSE: DF) as the driver of its Friday downgrade of the stock. 

The Analyst

Analyst Ken Goldman downgraded Dean Foods from Neutral to Sell and lowered the price target from $9 to $6.

The Thesis

Dean Foods is unlikely to meet consensus EPS expectations from 2018 through 2020, Goldman said in the downgrade note. (See the analyst's track record here.)

Goldman attributes his newly bearish stance to the following factors:

  • A likely third-quarter earnings miss.
  • Raw milk cost inflation.
  • A slackening in demand for fluid milk.
  • Customer attrition risk.
  • The possibility of Dean ceding share to milk alternatives.
  • Mix headwinds associated with the shift toward private label.
  • Doubts over the effects of cost-saving initiatives seeping down to the bottom line.
  • Potential red flags regarding reduced disclosures and corporate governance.
  • Cash constraints.
  • Valuation.

Goldman expressed concerns over dairy cost inflation later this year and early in 2019.

While European activist investor VV  Value Vals AG continues to build its stake in Dean Foods, Goldman said it's unclear what actions could be taken to create meaningful shareholder value. 

JPMorgan reduced its Q3 bottom-line estimate from a profit of 13 cents per share to a loss of 5 cents per share versus a break-even consensus estimate. The firm lowered its 2018 and 2019 EPS estimates to 41 and 60 cents, respectively, and introduced a 2020 estimate at 59 cents.

Despite the recent weakness in Dean Foods shares, Goldman said he's projecting further downside ahead. 

The Price Action

Dean Foods shares were down more than 6 percent at $8.20 before the close Friday. 

Related Links:

BMO Cites US Foods Analyst Day In Upgrade

Credit Suisse's Winners And Losers In The Food Space

Latest Ratings for DF

DateFirmActionFromTo
Nov 2018Credit SuisseMaintainsUnderperformUnderperform
Nov 2018JefferiesDowngradesBuyHold
Aug 2018JP MorganDowngradesNeutralUnderweight

View More Analyst Ratings for DF
View the Latest Analyst Ratings

Posted-In: JPMorgan Ken GoldmanAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (DF)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
MDRXKeyBancUpgrades0.0
ANETNomuraUpgrades260.0
CNPRBC CapitalUpgrades34.0
FISVOppenheimerUpgrades88.0
FNDUBSUpgrades37.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Bank Of America Upgrades Enbridge On Derisked Story

How 2 Companies Are Trying To Become The King Of Cannabis Brands