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Flowers Foods (FLO) Gains From Buyouts and Project Centennial

Zacks Equity Research

Despite rising input costs, Flowers Foods, Inc. FLO has managed to remain a delectable investment pick. This well-known baked products company has been gaining from prudent buyouts and efforts to boost operational efficiency.

We expect this Zacks Rank #2 (Buy) company’s growth plans to continue yielding in the forthcoming periods. Markedly, the stock gained 14.2% in the past three months, compared with the industry’s rise of 6.5%.

Let’s take a closer look.

Acquisitions Aid Portfolio Growth

Flowers Foods resorts to acquisitions to strengthen its product portfolio and expand in untapped markets. Notably, the company has acquired more than 100 companies since 1968 and 16 companies since 2003. In 2015, the company bought Dave’s Killer Bread (DKB) and Alpine Valley Bread company. With the acquisition of DKB, the company got access to the Pacific Northwest market.

In December 2018, the company completed the acquisition of Canyon Bakehouse, which has helped Flowers Foods foray into the growing gluten-free bakery space. Synergies from this buyout supported the company’s performance during the first quarter of 2019. In fact, management expect this buyout to boost the top-line by nearly $70-$80 million in 2019.

In addition to this, brands like DKB, Nature's Own and Wonder brands have continued to remain strong and drive market share. Notably the first quarter marks the company’s eleventh consecutive quarter of market share improvement.

Efforts to Boost Efficiency

Flowers Foods is progressing well 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. The project has propelled the company to become more brand and consumer-focused. In fact, based on the restructuring endeavors related to Project Centennial, the company has consolidated all its operations under a single segment as reflected in first-quarter results. Going ahead, the company expects the project to continue yielding profitably and support growth.

Additionally, efficient pricing strategy has also been an upside to Flowers Foods performance lately. Such measures helped the company counter inflation in the first quarter. In fact, price mix contributed nearly 3.2% to overall top-line growth in the said quarter.  Management expects its base business to continue gaining from improved price/mix.

Apart from Project Centennial, the company is also executing a multi-year supply-chain optimization plan to reduce fixed costs and is also on track with refreshing key brands.

All said, Flowers Foods is expected to remain in investors good books.

Looking For More Consumer Staples Stocks? Check These

General Mills GIS with long-term earnings per share (EPS) growth rate of 7%, flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

Campbell Soup Company CPB, with long-term earnings growth rate of 5%, carries a Zacks Rank #2 (Buy).

The Chefs' Warehouse CHEF, with a Zacks Rank #2, has long-term earnings growth rate of 15%.

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