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4 Factors That Make Flowers Foods (FLO) a Delicious Stock

Zacks Equity Research

Flowers Foods, Inc. FLO currently is a worthwhile bet, given its strategies to drive growth. This Zacks Rank #2 (Buy) stock has rallied 14.2% in the past three months, outpacing the industry’s growth of 5.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let’s take a look at the factors that are set to keep Flowers Foods’ momentum alive.

Focus on Boosting Market Share Through Buyouts

Flowers Foods has been focused on acquisitions to strengthen its product portfolio and expand in untapped markets. Notably, the company has acquired more than 100 companies since 1968, including 16 since 2003. With the acquisition of Dave’s Killer Bread (DKB), the company got access to the Pacific Northwest market. Recently, the company acquired Canyon Bakehouse, which will help it foray into the growing gluten-free bakery space. These efforts are likely to continue enhancing Flowers Foods’ portfolio, which in turn will help it increase market share. All said, management expects sales in 2019 to be $4.030-$4.109 billion, reflecting 2-4% year-over-year growth. Markedly, this includes nearly $70-$80 million contribution from Canyon’s buyout.

Price/Mix Aids Top Line

Flowers Foods is progressing well with its efficient pricing strategy. This helped the company counter soft volumes in the fourth quarter, wherein consolidated sales grew 80 basis points (bps), with price mix up 2.6%. Price mix improved in the DSD and Warehouse segments, backed by solid pricing activities across several product lines and increased DKB sales. In fact, management expects sales growth in 2019 to benefit from price mix.

Project Centennial Bodes Well

Flowers Foods is on track with Project Centennial, which is an enterprise-wide multi-year initiative. The plan is aimed at streamlining operations, fueling efficiencies, improving margins by curtailing cost, optimizing supply chain and making prudent investments to solidify Flowers Foods’ competitive position, aid revenue growth, and return value to stockholders. Further, the company intends to expand portfolio and increase adjacencies in the bakery category through organic growth and acquisitions.

Strategic Priorities on Track

Management is on track with its three core priorities in 2019. These include refreshing key brands to aid profitably and boost market share, making use of adjacencies, and enhancing supply-chain productivity to lift margins. Apart from Project Centennial, the company is also executing a multi-year supply-chain optimization plan to reduce fixed costs. This is essential for the company to achieve margin targets for the long term. Driven by such upsides, the company is confident about achieving 3-4% sales growth and EBITDA margins of 13-14% by 2021. Further, management expects to see long-term EPS CAGR of 8-10% and 2-3% increase in dividend yield for 2019 and beyond.

Without a doubt, Flowers Foods is set to add new flavors to its growth story.

Looking for More? Check These Appetizing Picks

MEDIFAST MED, with long-term EPS growth rate of 20%, sports a Zacks Rank #1.

General Mills GIS, with a Zacks Rank #2, has long-term earnings per share growth rate of 7.5%.

Lamb Weston LW, with long-term earnings per share growth rate of 12.4%, carries a Zacks Rank #2.

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