Flowers Foods (FLO) Looks Well-Placed on Pricing, Buyouts
Flowers Foods, Inc. FLO is in solid shape. The company has been benefiting from its focus on core priorities. Gains from pricing and acquisitions have also been working well for this packaged bakery product company amid cost inflation.
These factors fueled FLO’s second-quarter fiscal 2023 results, wherein the top and bottom lines increased year over year and beat the Zacks Consensus Estimate. A solid second-quarter show encouraged this Zacks Rank #2 (Buy) company to pull up the lower end of its full-year 2023 guidance.
The Zacks Consensus Estimate for 2023 earnings per share (EPS) has gone up by a penny to $1.21 per share over the past 30 days. Let’s delve deeper.
Factors Working Well
Flowers Foods’ core priorities include developing its team, concentrating on brands, prioritizing margins and looking out for prudent mergers and acquisitions. To this end, management has been shifting its focus toward becoming a more brand-focused company.
Moreover, the company expects its optimized portfolio to drive market share gains through innovation. Management is focused on undertaking innovation in its leading brands, which is likely to aid growth. In this regard, Flowers Foods’ countrywide launch of Dave’s Killer Bread Snack Bars is on track.
Moving to margins, the company is undertaking pricing and saving measures and efforts to enhance business efficiency. FLO has been focused on transitioning a larger part of its sales to higher-margin branded retail products (which formed 64.1% of sales in the second quarter of 2023). Further, the company is on track with digital transformation and supply-chain efforts. Flowers Foods is on its way to achieving savings of $20-$30 million in 2023.
Flowers Foods has been focusing on acquisitions to strengthen its product portfolio and expand in untapped markets. In February 2023, the company acquired Papa Pita Bakery, which boosted sales by 1.6% in the second quarter of 2023.
Moreover, in 2015, Flowers Foods 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.
Flowers Foods, Inc. Price, Consensus and EPS Surprise
Flowers Foods, Inc. price-consensus-eps-surprise-chart | Flowers Foods, Inc. Quote
Pricing Helps Offset Cost Inflation
Flowers Foods is battling hurdles due to cost inflation. In the second quarter of fiscal 2023, materials, supplies, labor and other production costs (excluding depreciation and amortization) were partly affected by input cost inflation, reduced production volumes, higher product returns and elevated maintenance costs. Management expects inflation to persist in 2024.
However, Flowers Foods’ pricing efforts have been helping it battle cost inflation and generate improved margins. In the second quarter of fiscal 2023, the pricing/mix increased 13.3%. Favorable pricing efforts boosted sales in both branded retail and other channels.
A Look at Q2 & Ahead
Pricing power, along with strength in the branded retail business, aided FLO’s second-quarter 2023 results. The adjusted EPS of 33 cents beat the Zacks Consensus Estimate of 28 cents. Also, the bottom line increased from 31 cents reported in the year-ago quarter. Sales increased 8.8% year over year to $1,228 million. The top line beat the Zacks Consensus Estimate of $1,206 million.
The company now expects sales in the range of $5.095-5.141 billion, suggesting a 6-7% increase year over year. Earlier, sales were expected in the range of $5.086-$5.141 billion, implying a rise of 5.8-7.0% year over year.
Adjusted EBITDA is likely to be in the range of $503-$528 million compared with the earlier view of $494-$528 million. For fiscal 2023, the adjusted EPS is envisioned in the band of $1.18-$1.25 compared with the earlier estimate in the band of $1.15-$1.25.
While shares of FLO have decreased 5.1% in the past three months, the company has outpaced the industry’s decline of 6.7%.
Other Solid Consumer Staple Bets
Inter Parfums IPAR, which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently sports a Zacks Rank #1 (Strong Buy). IPAR has an expected EPS growth rate of 15% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9%, on average.
McCormick & Company, Incorporated MKC, a spices, seasoning, condiments and other flavorful product company, currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 4.2%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales suggests growth of 6.4% from the corresponding year-ago reported figure.
Helen of Troy HELE, a provider of several consumer products, currently has a Zacks Rank #2. HELE’s expected EPS growth rate for three to five years is 8%.
The Zacks Consensus Estimate for Helen of Troy’s current fiscal-year sales suggests a decline of 2.9% from the year-ago reported numbers. HELE has a trailing four-quarter earnings surprise of 8.1%, on average.
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