Flowers Foods (FLO) Q3 Earnings Top Estimates, Sales View Down
Flowers Foods, Inc. FLO reported mixed third-quarter fiscal 2023 results, with the top line missing the Zacks Consensus Estimate but increasing year over year. The bottom line surpassed the consensus mark. However, earnings declined from the year-ago quarter’s reported levels. Management lowered its sales view while reaffirming earnings guidance for fiscal 2023.
Q3 Highlights
Adjusted earnings per share (EPS) of 29 cents surpassed the Zacks Consensus Estimate of 28 cents per share. The bottom line declined from 30 cents reported in the year-ago quarter.
Sales increased 3.5% year over year to $1,199.3 million. The top line missed the Zacks Consensus Estimate of $1,217.1 million. The pricing/mix remained favorable by 6.3%, while volumes fell by 4.1%.
Branded Retail sales rose 3% to $771.2 million on the back of improved prices undertaken to offset inflationary pressures, a favorable mix from more branded organic product sales and gains from the acquisition. These were somewhat offset by volume declines.
Other sales increased 4.5% to $428.1 million owing to improved prices undertaken to counter inflationary pressures and gains from acquisitions, somewhat countered by lower volumes.
Flowers Foods, Inc. Price, Consensus and EPS Surprise
Flowers Foods, Inc. price-consensus-eps-surprise-chart | Flowers Foods, Inc. Quote
Costs & Margins
Materials, supplies, labor, and other production costs (exclusive of depreciation and amortization) contracted 170 basis points (bps) to 51.5% of sales on inflation-driven pricing actions. However, input cost inflation, reduced production volumes, greater product returns and a rise in maintenance and labor costs were a concern.
Selling, distribution, and administrative (SD&A) expenses came in at 50.4% of sales, up 1,180 bps. The downside can mainly be attributed to increased legal settlement expenses. In addition, higher workforce-related costs, marketing investments and amortization of technology were hurdles. Nevertheless, reduced distributor distribution fees and acquisition costs offered some respite. Adjusted SD&A expenses expanded 200 bps to 38.4% of sales.
Adjusted EBITDA advanced 0.6% to $121.2 million. The adjusted EBITDA margin was 10.1%, contracting 30 bps.
Financial Aspects
The Zacks Rank #3 (Hold) company ended the reported quarter with cash and cash equivalents of $14.6 million and long-term debt of $1,037.8 million. Stockholders’ equity amounted to $1,374.7 million.
For the 12-week period ended Oct 7, 2023, cash flow from operating activities came in at $128.4 million and capital expenditures amounted to $97 million. The company paid dividends worth $146.7 million. Capital expenditures are projected in the range of $135-$145 million for fiscal 2023.
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Fiscal 2023 Guidance
The company expects sales in the range of $5.085-5.104 billion, suggesting a 5.8-6.2% increase year over year. Earlier, sales were expected in the range of $5.095-5.141 billion, suggesting a rise of 6-7% year over year.
Adjusted EBITDA is likely to be $495-$515 million compared with the earlier view of $503-$528 million. For fiscal 2023, the adjusted EPS is envisioned in the range of $1.18-$1.25.
Management expects depreciation and amortization in the range of $150-$155 million, while net interest expenses are likely to be $16-$18 million.
The company’s shares have dropped 14.2% in the past three months compared with the industry’s 11% decline.
3 Appetizing Picks
Lamb Weston LW, which offers frozen potato products, sports a Zacks Rank #1 (Strong Buy). LW delivered an earnings surprise of 46.2% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 24.8%, respectively, from the year-ago reported numbers.
Celsius Holdings CELH, a functional drink and liquid supplement company, currently carries a Zacks Rank #2 (Buy). CELH has a trailing four-quarter earnings surprise of 110.9% on average.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal year sales suggests growth of 91.6% from the corresponding year-ago reported figure.
The Kraft Heinz Company KHC, a food and beverage product company, currently carries a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9% on average.
The Zacks Consensus Estimate for Kraft Heinz’s current fiscal year sales suggests growth of 1.2% from the corresponding year-ago reported figure.
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