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Flowers Foods (FLO) Beats on Q3 Earnings, Raises 2021 View

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Flowers Foods, Inc. FLO announced third-quarter 2021 results wherein both the top and the bottom line exceeded the Zacks Consensus Estimate and grew year over year. FLO continued witnessing market share gains for its key brands. Also, non-retail business is steadily recovering from the impacts of the pandemic. Efforts with respect to innovation and marketing coupled with strength in brands are driving the results.

Flowers Foods also raised its sales and earnings per share (EPS) guidance for 2021. Following the earnings release, the stock gained 3.9% in after-hours trading on Nov 11.

Q3 Highlights

Adjusted EPS of 30 cents came ahead of the Zacks Consensus Estimate of 25 cents. The bottom line rose 3.4% from 29 cents earned in the year-ago period.

Sales rose 3.9% to $1,027.8 million and surpassed the Zacks Consensus Estimate of $1,012 million. Branded retail sales increased 4.8% to $689.1 million. Store branded retail sales dropped 8.5% to $124.6 million. Non-retail and other sales rose 9.2% to $214.2 million.

Flowers Foods, Inc. Price, Consensus and EPS Surprise

Flowers Foods, Inc. Price, Consensus and EPS Surprise
Flowers Foods, Inc. Price, Consensus and EPS Surprise

Flowers Foods, Inc. price-consensus-eps-surprise-chart | Flowers Foods, Inc. Quote

Costs & Margins

Materials, labor, supplies and other production expenses (excluding depreciation and amortization) as a percentage of sales contracted 20 basis points (bps) year over year to 50.1%. This decline can be attributed to increased sales and $1.9 million of start-up costs in the prior-year period with respect to the conversion of Flowers Foods’ Lynchburg, VA facility to an organic bakery. Higher favorable price/mix negated elevated commodity costs, offset by lower outside purchases.

Adjusted selling, distribution and administrative costs as a percentage of sales flared up 40 bps to 38.4% on account of escalated transportation costs and marketing investments, partly offset by reduced distributor distribution fees. Adjusted EBITDA inched up 1.8% to $118.5 million while adjusted EBITDA margin contracted 30 bps to 11.5%.

More Financial Aspects

Flowers Foods ended the reported quarter with cash and cash equivalents of $307.5 million and a long-term debt of $890.2 million. Stockholders’ equity amounted to $1,411.9 million.

This year through the third quarter of 2021, FLO’s cash flow from operating activities has amounted to $315.2 million while capital expenditures have been $86.7 million.

Flowers Foods paid out dividends worth $131.5 million in the aforementioned period and has 5.8 million shares remaining under the ongoing repurchase program. Capital expenditures are projected in the range of $125-$135 million for 2021.

2021 Guidance

Management remains impressed with Flowers Foods’ year-to-date performance, powered by its leading brands and continued investments toward enhancing sales and optimizing network. FLO remains encouraged about its potential, thanks to a firm focus on its four key strategies. These include developing its team, undertaking prudent mergers and acquisitions, concentrating on brands and prioritizing margins.

Management now projects sales in the range of $4.300-$4.344 billion, suggesting a 1-2% decline from the year-ago reported figure. This outlook includes a 1.8% sales reduction due to one less week in the current year. Earlier, sales were anticipated to be $4.256-$4.300 billion.

EPS is now envisioned in the range of $1.22-$1.26, up from the prior projection of $1.17-$1.22. The guidance includes an effect of nearly 2 cents from a week less in 2021 and an impact of 1 cent in the final quarter for appreciation bonuses to its frontline workers.

The Zacks Consensus Estimate for 2021 sales and earnings currently stands at $4.29 billion and $1.19, respectively.

Flowers Foods expects net interest expenses of about $8 million and an effective tax rate of nearly 24.5% for the year.

Shares of the currently Zacks Rank #3 (Hold) FLO have risen 11.5% over the past three months against the industry’s 0.6% dip.

How Other Stocks Fared

Here are the earnings highlights of some better-ranked stocks from the broader Consumer Staples space that houses Flowers Foods.

The Hain Celestial Group, Inc. HAIN posted first-quarter fiscal 2022 results on Nov 10 with both sales and earnings surpassing the Zacks Consensus Estimate. However, the top and the bottom line declined on a year-on-year basis. Quarterly performance was affected by tough year-over-year comparisons, thanks to elevated demand conditions resulting from the pandemic in the prior-year quarter.

Hain Celestial is confident of its business growth momentum in the long run and reaffirmed its guidance for fiscal 2022. Shares of the presently Zacks Rank #2 (Buy) HAIN have increased 2.9% in the past three months against the industry’s dip of 0.6%. HAIN has a trailing four-quarter earnings surprise of 9.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Albertsons Companies, Inc. ACI posted second-quarter fiscal 2021 results on Oct 18. ACI’s top- and the bottom-line metrics reflected year-over-year growth as well as surpassed the Zacks Consensus Estimate. Results benefited from strong identical sales as well as digital revenues.

Albertsons saw strong traffic trends across stores as vaccinations propelled consumers to spend more time outdoors. ACI’s transformation strategy is also on track. Shares of this presently Zacks #2 Ranked ACI have increased 16.2% in the past three months against the industry’s decline of 8.4%. ACI has a trailing four-quarter earnings surprise of 37.6%, on average.

The Hershey Company HSY reported stellar third-quarter 2021 results on Oct 28. HSY’s top and the bottom line beat the Zacks Consensus Estimate and increased year over year. Solid consumer demand for brands contributed to the upbeat performance. HSY witnessed growth in the North America, and International and Other segments.

Following stronger-than-anticipated results, Hershey raised net sales and earnings view for 2021. Better-than-expected consumer demand, an improved tax outlook and an optimized brand investment are tailwinds. The currently Zacks #3 Ranked stock has gained 1.2% in the past three months compared with the industry’s 2.1% rise. HSY has a trailing four-quarter earnings surprise of 4.4%, on average.


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