JPMorgan Turns Bearish on Dean Foods

JPMorgan is now bearish on shares of food and beverage maker Dean Foods (DF), citing numerous reasons for caution.

The firm dropped its rating on Dallas-based Dean Foods to Underweight from Neutral and cuts its price target to $6 from $9 to now expect a roughly 30% downside to current trading prices.

Dean Foods, the largest dairy company in the U.S., holds dozens of food and beverage brands, including DairyPure, TruMoo, Friendly’s, and Dean’s.

JPMorgan analyst Ken Goldman pointed to increasing costs, waning demand and a more competitive marketplace as some of his reasons for dropping his rating on Dean Foods. He also warned on cash constraints and valuation as well as “potential red flags associated with the shift toward private label.” He said he expected the company, which recently reported a reduced full-year outlook, had a good chance of missing its third-quarter earnings targets.

“The more we scrubbed the numbers, the less confidence we had that Dean would hit Street forecasts for EPS in any of the next three years," Goldman said in a note. 

Second-Quarter Results

Dean Foods reported second-quarter earnings and revenue earlier this month that met Street estimates. Adjusted earnings were $0.16 per share and revenue was $1.95 billion, up from $1.93 billion a year prior. (See also: Goldman Sachs Sees S&P 500 at 2850 at Years End.)

Shares of Dean Foods have fallen more than 25% year to date as the S&P 500 gained 6.3%. In pre-market trade Friday, the stock was down about 9%.

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