Dean Foods Co. ( DF ) is scheduled to report its fourth-quarter 2011 financial results before the market opens on February 15, 2012. The current Zacks Consensus Estimate for the quarter is 23 cents per share. For the quarter under review, revenue is expected to be $3,338 million, according to the Zacks Consensus Estimate.

For full fiscal 2011, the current Zacks Consensus Estimate for earnings and revenue stands at 73 cents per share and $13,110 million, respectively.

Third-quarter 2011, a synopsis

Dean Foods' adjusted earnings of 18 cents per share for the third quarter of fiscal 2011 was well above 13 cents recorded in the year-ago quarter. The quarterly earnings also surpassed the Zacks Consensus Estimate of 15 cents a share.

Dean Foods' quarterly net sales grew 11.7% year over year to $3,410.8 million, beating the Zacks Consensus Estimate of $3,316 million. The growth was primarily a pass-through of increased commodity costs at Fresh Dairy Direct-Morningstar to consumers in the form of higher prices. Moreover, strong top-line performance at WhiteWave-Alpro also boosted the company's revenue growth. However, the increases were partially offset by sluggish volume at Fresh Dairy Direct-Morningstar.

Guidance for fourth-quarter and fiscal 2011

For the fourth quarter of fiscal 2011, Dean Foods expects earnings in the range of 20 cents to 25 cents a share. Moreover, the company forecasts full-year 2011 adjusted earnings in the range of 69 cents to 74 cents a share, narrowed from its earlier guidance range of 67 cents to 75 cents a share.

Zacks Consensus

The analyst covered by Zacks expects Dean Foods to post fourth-quarter 2011 earnings of 23 cents a share compared with 15 cents delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between earnings of 20 cents and 26 cents a share.

For fiscal 2011, the Zacks Consensus Estimate stood at 73 cents per share, lower than its previous fiscal earnings of 80 cents. The current Zacks estimate ranges between 70 cents and 76 cents per share.

Agreement of Estimates

For fourth quarter and fiscal 2011, of the 13 analysts covering the stock, only one analyst revised its estimates downward, while none has revised in the opposite direction, in the last 30 days. Similarly, over the last 7 days, only one analyst downgraded its estimate for fourth quarter and fiscal 2011, while none has revised their estimate in opposite direction.

Magnitude of Estimate Revisions

With only one analyst's revision in estimates in the last 7 and 30 days for the fourth quarter of fiscal 2011, the estimate remained static at 23 cents a share. Similarly, over the last 7 and 30 days, there has been no movement in estimates for fiscal 2011.

Surprise History

With respect to earnings surprises, Dean Foods has topped the Zacks Consensus Estimate over the last four quarters in the range of 5.9% to 133.3%. The average remained at positive 41.6%. This suggests that Dean Foods has surpassed the Zacks Consensus Estimate by an average of 41.6% in the trailing four quarters.

Our Take

To muddle through the declining fluid milk processing profits due to increased money-offs on private label milk distribution and weak sales volume, Dean Foods is taking prudent steps, including price realization through passing input cost inflation to customers, cost reduction initiatives and increasing volume performance. We believe that these fundamental steps will facilitate in stemming the decline while rebuilding the company's profitability.

Moreover, Dean Foods continues to make headway in its efforts to achieve the lowest cost position in the industry. The company has benefited from its continued focus on cost reduction initiatives across the businesses including headcount reductions. The company also intends to move aggressively toward streamlining its cost structure while aiming to achieve total cost savings of $300 million by the end of fiscal 2011 under the cost reduction program started in 2009.

However, Dean Foods' recent decision to divest its milk processing and related businesses situated in Waukesha, Wisconsin will certainly hurt its top line as the company has more than 60% of market share in the region. The divestment decision is a part of antitrust dispute settlement agreement between the company and the U.S. Department of Justice (DOJ) and the states of Wisconsin, Illinois and Michigan.

Dean Foods, which competes with Kraft Foods Inc. ( KFT ), currently has a Zacks #3 Rank, implying a short-term 'Hold' rating on the stock. Besides, we retain a long-term 'Neutral' recommendation on the stock.