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Flowers Foods (FLO) Q1 Earnings Beat Estimates, Sales Down Y/Y

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Flowers Foods, Inc. FLO reported first-quarter fiscal 2021 results, with the top line declining year over year and falling short of the Zacks Consensus Estimate. Further, the bottom line was flat on a year-over-year basis. Nevertheless, the metric came ahead of the consensus mark. Notably, the company benefited from gains in the non-retail and other sales category. However, these were countered by declines in branded retail and store branded retail categories.

Q1 in Detail

Adjusted earnings per share (EPS) of 41 cents came ahead of the Zacks Consensus Estimate of 37 cents. The bottom line remained unchanged from 41 cents reported in the year-ago quarter.

Sales declined 3.5% to $1,302.2 million, which missed the Zacks Consensus Estimate of $1,306.6 million. We note that the metric compares with record results posted in the year-ago quarter, which was backed by pandemic-led demand. While pricing/mix increased 3.4%, volumes fell 6.9%.

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 (exclusive of depreciation and amortization), as a percentage of sales, contracted 30 basis points (bps) year over year to 49.4%. This can be attributed to reduced short-term compensation and improved plant efficiencies. These were somewhat offset by higher ingredient and packaging costs, as a percentage of revenues. Also, the year-ago quarter’s figure included $1.7 million in start-up costs related to the conversion of the company’s Lynchburg, VA facility to an organic bakery.

Adjusted selling, distribution and administrative (SD&A) costs, as a percentage of sales, were flat at 38.2%. Notably, reduced bad debt expenses and distributor distribution fees were countered by higher e-commerce marketing costs.

Adjusted EBITDA inched down 1% to $161.6 million, whereas adjusted EBITDA margin expanded 30 bps to 12.4%.

Category Performance

Branded retail sales declined 3.3% to $861.4 million mainly due to weak volume in cake as well as white and soft variety bread. These were somewhat countered by volume gains in organic and gluten-free products. Also, favorable price/mix was an upside.

Store branded retail sales declined 14.6% to $162.9 million mainly due to volume declines stemming from shift in consumers’ purchases to branded retail products.

Further, non-retail and other sales rose 3.6% to $277.9 million compared with drab sales in the year-ago quarter owing to the pandemic. Well, favorable price/mix were somewhat offset by reduced volume.

More Financial Aspects

The company ended the quarter with cash and cash equivalents of $250.6 million and long-term debt of $889.6 million. Further, stockholders’ equity amounted to $1,413.4 million.

For 16 weeks ended Apr 24, 2021, the company’s cash flow from operating activities amounted to almost $98 million, while it incurred capital expenditures of $27.3 million. Capital expenditures are projected in the range of $140-$150 million for fiscal 2021.

Flowers Foods paid out dividends worth $42.5 million in the aforementioned period and has 6.1 million shares remaining under the ongoing repurchase program.

Fiscal 2021 Guidance

Management projects sales in the range of $4.23-$4.30 billion for fiscal 2021, suggesting a decline of about 3.5-2% year over year. This includes a 1.8% sales reduction owing to one less week in fiscal 2021. Earlier, the company had projected sales in the range of $4.21-$4.30 billion for fiscal 2021, suggesting decline of 4-2% year over year.

Further, EPS isnow envisioned in the range of $1.10-$1.17 that includes an effect of nearly 2 cents from one fewer week in fiscal 2021. Prior to this, EPS was anticipated in the range of $1.07-$1.17 including an effect of nearly 2 cents from one fewer week in fiscal 2021.

The company expects net interest expenses of about $10 million and an effective tax rate of nearly 24.5% for the fiscal year.

Shares of this Zacks Rank #3 (Hold) company have increased 11.9% in the past three months compared with the industry’s growth of 8.9%.

Some Solid Food Bets

Medifast, Inc. MED, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 12.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hain Celestial Group, Inc. HAIN, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 26.4%, on average.

Pilgrim’s Pride Corporation PPC, currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 27%.

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