Dean Foods (DF) Stock Tumbles as Credit Suisse Drops Rating
NEW YORK (TheStreet) -- Dean Foods Co. (DF) - Get Report shares are slumping 3.32% to $18.61 on Tuesday after Credit Suisse downgraded the food and beverage company to "underperform" from "neutral" and cut its price target to $18 from $19.
Challenges including weakening consumer demand for dairy and excess process capacity are persisting, which will likely hurt the company, according to the firm's note.
Analysts also believe that farmers will slash production to raise dairy prices.
Consequently, "We think Dean's stock has less-than-average upside over the next 12 months in relation to our food stock coverage," analysts said.
Based in Dallas, Dean Foods processes and distributes milk, and other dairy and dairy case products in the U.S.
Separately, TheStreet Ratings team rates DEAN FOODS CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate DEAN FOODS CO (DF) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and generally higher debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 4211.5% when compared to the same quarter one year prior, rising from -$0.65 million to $26.52 million.
- Powered by its strong earnings growth of 2900.00% and other important driving factors, this stock has surged by 32.64% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- DEAN FOODS CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DEAN FOODS CO swung to a loss, reporting -$0.21 versus $3.39 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus -$0.21).
- The gross profit margin for DEAN FOODS CO is currently lower than what is desirable, coming in at 26.56%. Regardless of DF's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, DF's net profit margin of 1.31% is significantly lower than the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food Products industry and the overall market, DEAN FOODS CO's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: DF