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Dean Foods (DF) Looks Promising: What's Driving the Stock?
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Dean Foods Company’s solid bull run is enough to attract investor attention. This Zacks Rank #1 (Strong Buy) stock has displayed a marvelous performance, with its shares improving 21.6% on a year-to-date basis and crushing the Zacks categorized Consumer Staples sector’s growth of 1.3%. Let’s delve deeper to find out what’s been driving this dairy products company forward.
Growth Drivers
Dean Foods has been riding on its brand strength, focused strategic growth plans and decent earnings history.
The company flaunts a strong portfolio of brands that provides a competitive advantage and complements its customer base. Through its brands, the company also leverages the national scale of its distribution network. Additionally, being one of the low-cost producers, the company is well positioned in the industry and strives to extend this advantage further through cost-reduction activities across its business.
Further, Dean Foods has been committed toward taking 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, which will all aid in delivering appropriate returns.
In this regard, the company underwent a major transformation into a core dairy products company in 2013 and has since been concentrating to enhance its dairy business. This is evident from its recent buyout of Friendly's Ice Cream and continued success of its previously introduced DairyPure and TruMoo brands.
Driven by these growth initiatives and healthy cash flows, Dean Foods’ bottom line has outperformed estimates by an average of 5.4% in the trailing four quarters. In third quarter of 2016, the company’s earnings matched the Zacks Consensus Estimate and surged year over year, driven by a decline in raw milk prices. Also, sales exceeded our estimates, thus scoring a hat-trick of positive sales surprises.
Following the impressive results, management stated that it expects the fourth quarter to mark Dean Foods’ eighth straight quarter of adjusted operating income growth. The company also issued a robust fourth-quarter earnings view, which in turn has been pulling the Zacks Consensus Estimate upward. Evidently, earnings estimates for the fourth quarter of 2016 and the full year have jumped 13.5% to 42 cents and 3.2% to $1.62, respectively, over the past 60 days.
These factors clearly indicate that analysts have become more constructive of Dean Foods’ performance. We believe that these factors, along with the company’s shareholder-friendly moves, will attract more investors.
Sysco Corporation’s earnings have outperformed the Zacks Consensus Estimate by an average of 11.7% in the trailing four quarters. Moreover, its long-term earnings EPS growth rate of 8.8% and positive estimate revisions over the past 60 days bode well.
Ingredion Incorporated, with a long-term EPS growth rate of 11%, has seen positive estimate revisions for 2016, over the past 60 days. The company also flaunts a solid earnings surprise history.
Lancaster Colony has posted positive earnings surprises consistently for three quarters now. Also, the company has seen its estimates move north in the past 30 days.
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Dean Foods (DF) Looks Promising: What's Driving the Stock?
Dean Foods Company’s solid bull run is enough to attract investor attention. This Zacks Rank #1 (Strong Buy) stock has displayed a marvelous performance, with its shares improving 21.6% on a year-to-date basis and crushing the Zacks categorized Consumer Staples sector’s growth of 1.3%. Let’s delve deeper to find out what’s been driving this dairy products company forward.
Growth Drivers
Dean Foods has been riding on its brand strength, focused strategic growth plans and decent earnings history.
The company flaunts a strong portfolio of brands that provides a competitive advantage and complements its customer base. Through its brands, the company also leverages the national scale of its distribution network. Additionally, being one of the low-cost producers, the company is well positioned in the industry and strives to extend this advantage further through cost-reduction activities across its business.
Further, Dean Foods has been committed toward taking 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, which will all aid in delivering appropriate returns.
In this regard, the company underwent a major transformation into a core dairy products company in 2013 and has since been concentrating to enhance its dairy business. This is evident from its recent buyout of Friendly's Ice Cream and continued success of its previously introduced DairyPure and TruMoo brands.
Driven by these growth initiatives and healthy cash flows, Dean Foods’ bottom line has outperformed estimates by an average of 5.4% in the trailing four quarters. In third quarter of 2016, the company’s earnings matched the Zacks Consensus Estimate and surged year over year, driven by a decline in raw milk prices. Also, sales exceeded our estimates, thus scoring a hat-trick of positive sales surprises.
Following the impressive results, management stated that it expects the fourth quarter to mark Dean Foods’ eighth straight quarter of adjusted operating income growth. The company also issued a robust fourth-quarter earnings view, which in turn has been pulling the Zacks Consensus Estimate upward. Evidently, earnings estimates for the fourth quarter of 2016 and the full year have jumped 13.5% to 42 cents and 3.2% to $1.62, respectively, over the past 60 days.
DEAN FOODS CO Price and Consensus
DEAN FOODS CO Price and Consensus | DEAN FOODS CO Quote
These factors clearly indicate that analysts have become more constructive of Dean Foods’ performance. We believe that these factors, along with the company’s shareholder-friendly moves, will attract more investors.
Other Stocks to Consider
Apart from Dean Foods, other favorably placed stocks in the food industry include Sysco Corporation (SYY - Free Report) , Ingredion Incorporated (INGR - Free Report) and Lancaster Colony Corporation (LANC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Sysco Corporation’s earnings have outperformed the Zacks Consensus Estimate by an average of 11.7% in the trailing four quarters. Moreover, its long-term earnings EPS growth rate of 8.8% and positive estimate revisions over the past 60 days bode well.
Ingredion Incorporated, with a long-term EPS growth rate of 11%, has seen positive estimate revisions for 2016, over the past 60 days. The company also flaunts a solid earnings surprise history.
Lancaster Colony has posted positive earnings surprises consistently for three quarters now. Also, the company has seen its estimates move north in the past 30 days.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>