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Flowers Foods, Inc. FLO posted first-quarter 2020 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. Moreover, management is impressed with the company’s quarterly performance, marked by record high sales and earnings.
Adjusted earnings per share (EPS) of 41 cents came ahead of the Zacks Consensus Estimate of 34 cents. Moreover, the bottom line increased 28.1% year over year.
Net sales increased 6.8% to $1,349.4 million, which beat the Zacks Consensus Estimate of $1,329 million. Notably, increased demand owing to the coronavirus pandemic contributed to this growth in the range of 6.5-7.5%. Sales were backed by increased branded retail, which more than offset lower store-branded retail sales along with non-retail and other sales.
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 (net of depreciation and amortization), as a percentage of sales,contracted 190 basis points (bps) year over year to 49.7%.The upside can be attributed to better product mix, which more than offset increased workforce-related costs as well as higher start-up expenses.
Selling, distribution and administrative expenses (as a percentage of sales) expanded 100 bps, courtesy of increased distribution fees and workforce-related costs.
Adjusted EBITDA rose 19% to $163.3 million, whereas adjusted EBITDA margin expanded 120 bps to 12.1%.
Branded retail sales rose 17.7% to $891.5 million. The upside can be attributed to a favorable shift in the product mix from non-retail and other to branded retail segment owing to the coronavirus pandemic.
Store branded retail sales inched down 0.5% to $190.2 million, thanks to softness in store branded breakfast bread business as well as reduced volumes in store branded cake. This was somewhat offset by increased sales in store branded gluten-free products manufactured by Canyon Bakehouse.
Non-retail and other sales dropped 15% to $267.8 million due to lower business for majority of the company’s non-retail customers amid the COVID-19 outbreak.
More Financial Aspects
The company ended the quarter with cash and cash equivalents of $252.7 million and long-term debt of $1,070.6 million. Further, stockholders’ equity amounted to $1,320.6 million.
At the end of the first quarter, the company’s cash flow from operating activities amounted to $106.2 million, while it incurred capital expenditure of $21.7 million. Capital expenditure is projected in the range of $95-$105 million for 2020.
Flowers Foods paid out dividends worth $40.3 million in the quarter and has 6.2 million shares remaining under the ongoing repurchase program.
To maintain financial liquidity amid the coronavirus crisis, the company has drawn down $200 million from its credit facility.
In 2020, the company intends to stay committed toward enhancing its portfolio and supply chain that are anticipated to deliver nearly $10-$20 million in savings during 2020.
The company reaffirmed its previously provided 2020 view. Management expects sales of $4.206 -$4.289 billion for 2020, suggesting 2-4% growth from the year-ago period’s reported figure. Adjusted EPS is projected to be $1.00-$1.08, indicating growth of 4.2-12.5% from the year-ago period’s reported figure. However, the mid-point of $1.04 is lower than the current Zacks Consensus Estimate of $1.06.
The shares of this Zacks Rank #2 (Buy) company have gained 1.2% in the past three months against the industry’s decline of 10.3%.
Other Solid Food Stocks
General Mills GIS currently has a long-term earnings growth rate of 7.5% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Campbell Soup Company CPB presently has a long-term earnings growth rate of 7.2% and a Zacks Rank #2.
Conagra Brands CAG currently has a long-term earnings growth rate of 7% and a Zacks Rank #2.
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