Flowers Foods, Inc. FLO appears to be placed on solid grounds, thanks to its vigorous growth efforts and increased buying due to the coronavirus-induced elevated at-home consumption. Markedly, the Zacks Rank #1 (Strong Buy) stock has rallied 13.2% in the past three months compared with the industry’s growth of 7.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Moreover, the packaged bakery products provider has seen an uptrend in its Zacks Consensus Estimate for third quarter as well as 2020 earnings in the past 60 days. Evidently, the consensus mark has moved up from 22 cents to 25 cents for the third quarter, and from $1.13 to $1.22 for 2020. On that note, let’s discuss the factors that are boosting Flowers Foods’ growth.
Flowers Foods, Inc. Price, Consensus and EPS Surprise
Flowers Foods, Inc. price-consensus-eps-surprise-chart | Flowers Foods, Inc. Quote
Factors Enriching Flowers Foods Flavor
Flowers Foods is focused on strengthening its brands. Toward this end, the company is committed toward making acquisitions and expanding in untapped markets. The company bought Dave’s Killer Bread (DKB) in 2015, which is yielding solid results. In December 2018, it completed the acquisition of Canyon Bakehouse, which has helped Flowers Foods foray into the growing gluten-free bakery space. Additionally, Nature’s Own and Wonder brands continue to perform well. Notably, Nature’s Own is the top soft variety brand in the United States, with estimated retail sales of nearly $1.2 billion in 2020. DKB, which is the top organic loaf brand, is expected to deliver retail sales of nearly $760 million in 2020. Further, Canyon Bakehouse has emerged as the number one gluten-free brand.
These brands continued to deliver robust performances in the second quarter of 2020, with earnings and sales increasing year over year and beating the consensus mark. Notably, higher demand stemming from the coronavirus pandemic contributed to this growth. Higher branded retail sales helped offset decline in store branded retail sales and non-retail and other sales. The increased mix of branded retail sales also boosted margins and the bottom line. Many other food players like Kellogg K, Conagra CAG and General Mills GIS are gaining on elevated demand trends amid the pandemic.
Meanwhile, Flowers Foods projects sales in the range of $4.290-$4.330 billion for 2020, suggesting growth of about 4-5% year over year. Earlier, it expected sales in the band of $4.206-$4.289 billion, which indicated 2-4% growth from the year-ago period’s reported figure. Adjusted EPS is now envisioned to be $1.15-$1.25, indicating growth of about 19.8-30.2% from the year-ago period. This guidance is above the earlier-projected range of $1.00-$1.08 per share that suggested an improvement of 4.2-12.5% year over year.
Focus on Core Priorities
The company is on track with its core priorities, which include developing its team, concentrating on brands, prioritizing margins and looking out for prudent buyouts. To this end, the company intends to shift focus toward value-added branded retail products, which are anticipated to aid top-line growth and enhance margins. Also, the company expects its optimized portfolio to drive market share gains through innovation.
Further, Flowers Foods is focused on optimizing the supply chain (which it had started under the Project Centennial program), while enhancing efficiency and reducing costs. The company’s brand-building efforts, such as plans to shift a larger proportion of sales mix to branded retail, are likely to aid margin performance. Finally, management intends to remain committed to making marketing investments, undertaking innovation and go for smart M&A activities in line with its portfolio strategy.
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