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Flowers Foods Looks Sumptuous on Buyouts & Cost Saving Plans

Zacks Equity Research
·4 min read

Flowers Foods, Inc. FLO is well positioned on the back of its robust growth-oriented strategies. In this regard, the company’s focus on lucrative buyouts along with stringent cost saving efforts bode well. Also, the company’s efficient price/mix strategy is working in its favor.

Apart from these, the company has been witnessing higher consumer demand for its products owing to coronavirus-led stockpiling and increase in at-home consumption. Impressively, this change in consumer behavior favorably impacted first-quarter 2020 results, with the top and the bottom line increasing year over year as well as beating the Zacks Consensus Estimate.

Management expects sales to grow 2-4% year over year in 2020. Also, adjusted earnings per share is projected to improve 4.2-12.5% from the year-ago period’s reported figure of 96 cents. Additionally, analysts are optimistic regarding the stock’s performance.

The Zacks Consensus Estimate for 2020 earnings improved a couple of cents to $1.09 per share in the past 30 days, which indicates year-over-year increase of 13.5%. The consensus estimate for revenues for the current financial year is pegged at $4.32 billion, which suggests a rise of nearly 5% from the year-ago period’s level.

Notably, shares of Flowers Foods have gained 6.5% year to date against the industry’s decline of 6%. Also, the stock has comfortably outperformed the sector’s decline of 8.6% in the same period.

What’s Working in Favor of Flowers Foods

Flowers Foods has been focusing on acquisitions to strengthen its product portfolio and expand in untapped markets. In December 2018, the company completed the acquisition of Canyon Bakehouse, which has helped it foray into the growing gluten-free bakery space. Well, the company has successfully integrated Canyon Bakehouse, which is yielding positive results. In 2015, management bought Dave’s Killer Bread (DKB) and Alpine Valley Bread. We note that, brands like DKB, Nature's Own and Wonder brands continue to perform well, with DKB emerging as one of its top brands.

Moreover, Flowers Foods is progressing well with its efficient pricing strategy. In fact, price mix contributed 6.2% to sales increase in the first quarter of 2020. The upside can be attributed to the shift toward branded retail items.

Moving on, Flowers Foods is on track 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. Markedly, the company expectsits portfolio and supply chain optimization efforts to deliver cost savings of $10-20 million in 2020.

Although Flowers Foods’ foodservice performance has been under pressure due to restaurant closures amid the pandemic, we believe that its well-knit growth strategies will continue driving this Zacks Rank #2 (Buy) company’s performance

Other Solid Consumer Staple Bets

Church Dwight CHD, with a Zacks Rank #2, has a long-term earnings growth rate of 8.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Campbell Soup Company CPB, with a Zacks Rank #2, has a long-term earnings growth rate of 8%.

The Kraft Heinz Company KHC, with a Zacks Rank #2, has a long-term earnings growth rate of 6%.

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Campbell Soup Company (CPB) : Free Stock Analysis Report
Church Dwight Co., Inc. (CHD) : Free Stock Analysis Report
Flowers Foods, Inc. (FLO) : Free Stock Analysis Report
The Kraft Heinz Company (KHC) : Free Stock Analysis Report
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