As Analysts Bail Out of Dean Foods, Contrarian and Value Takes

Companies and Brands

Published: February 13, 2014 2:52 pm

Dean Foods Co. (NYSE: DF) is among the food companies under post-earnings pressure this week. This company has been a long-time turnaround stock, yet the company just keeps having a hard time turning the ship around. Everything looks bad here, but contrarians and value investors might be starting to take a different look here.

The root behind weak results was a combination of pressures. Lower food stamp benefits did not help many food companies – Dean included. Cold weather, school and office closures, and raw milk costs are all working against the company.

Now Wall Street analysts are bailing out after the loss for the quarter. Stifel Niclolaus downgraded the stock to Hold from Buy on Wednesday. The firms of BMO Capital Markets, KeyCorp, Sanford Bernstein, and Stephens all lowered their price targets on the stock. The Thomson Reuters consensus target price was $18 this morning, but after the downgrades and target prices being cut so much this is going to likely be closer to $16 soon.

Dean Foods stock price was down only 4-cents at $14.15 on Thursday in late afternoon trading. Still, this was at $15.20 before its earnings disappointment this week, and the 52-week trading range is $13.52 to $22.96.

Dean Foods now trades at about 14-times expected 2014 earnings per share estimates. Its $1.34 billion in market value compares to about $9 billion in revenues.

What happens when a stock slides and slides on news that may have been able to be interpreted? Maybe Dean Foods is turning into a good contrarian situation.

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