Deutsche Bank Comments on Dean Foods (DF) Following Q2 Results

Deutsche Bank maintained a Hold rating on Dean Foods (NYSE: DF) with a price target of $14.00 (from $15.00). Comments follow soft Q2 results. Analyst Eric Katzman said he was staying on the sidelines.

"Given weak category volume and high milk cost, Dean reported poor 2Q14 results while withdrawing full year guidance. We aren’t too surprised and remain cautious as such challenging trends seem likely to continue. Thus, despite Dean’s cost reduction efforts and sequential market share improvement, we remain on the sidelines," said Katzman.

"Almost everything that could go wrong has gone wrong for Dean. Similar to the food industry, milk volume weakness has accelerated making a bad situation even worse. At the same time dairy cost remain stubbornly high with higher margin branded volume losing to private label. Dean is cutting cost but simply can’t move fast enough. At the same time leverage has moved up (3.6x) on weak EBITDA, forcing amendment adjustments," he added. "With frustration over persistent high dairy cost, CEO Tanner withdrew 2014 guidance. Forecasting Dean’s results into 2015 remains very challenging and we caution too much reliance. Nevertheless we reduce 2014 EPS from $0.54 to a loss of $0.32 while also lowering 2015 to $0.50 from $0.79."

For an analyst ratings summary and ratings history on Dean Foods click here. For more ratings news on Dean Foods click here.

Shares of Dean Foods closed at $15.81 yesterday.

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