For Immediate Release
Chicago, IL – July 11, 2013 – Zacks Equity Research highlights Flower Foods Inc. ((FLO - Snapshot Report)-Free Report) as the Bull of the Day and RadioShack Corporation (-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on the Green Mountain Coffee Roasters Inc. (GMCR - Analyst Report)-Free Report), Unilever plc.(UL - Analyst Report)-Free Report) and Dunkin Brands Group Inc. (DNKN - Analyst Report)-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Just because the Twinkie vanished off of store shelves doesn't mean that people don't want their snack cakes. Flower Foods Inc. ((FLO - Snapshot Report)-Free Report) has been one of the direct beneficiaries of Hostess' demise. This Zacks Rank #1 (Strong Buy) has seen huge profits over the last 9 months.
Flower Foods operates 44 bakeries that produce breads, buns, rolls, snack cakes and pastries to stores in the Southeast, Southwest and Mid-Atlantic states.
Flower Foods has been on an acquisition streak. It had good timing when it bought the struggling Tastykake brand of snack cakes in 2011 for $175 million. Headquartered in Philadelphia, and founded in 1914, the brand is a direct competitor of Hostess snack cakes.
When Hostess vanished off the store shelves, what was a snack cake fan supposed to do? If you could no longer get your ding-dong, you could buy the Tastykake cupcake or Kreamies instead.
Hostess products disappeared off of shelves in November of 2012 but are expected to return on July 15. In the meantime, Flower Foods has seen a surge in business. Total sales were up 29.5% in the first quarter on the back of a 19.3% volume increase due to the absence of Hostess from the market, in both breads and snack cakes.
But will it last? Analysts are encouraged that Flower has had shelf time when Hostess has not. How much of that will endure after Hostess comes back this month is unclear. But some consumers who tried Flower Foods' brands after Hostess disappeared may end up sticking with it.
On July 8, Flower Foods confirmed that it had received regulatory approval from the Department of Justice to acquire 20 bakeries and 36 depots from Hostess Brands for $360 million. Flowers is buying the bread business, however, and not the Twinkies and other brands. The breads include Wonder, Nature's Pride, Merita, Home Pride and the Butternut brand.
The transaction should close in a few weeks and then Flower Foods is expected to slowly roll out the re-openings.
Bear of the Day:
RadioShack Corporation (-Free Report) hasn't been profitable since 2012 as sales and margins have eroded. But this Zacks Rank #5 (Strong Sell) has a new CEO and is testing new concept stores. Is it too late to save this electronics retailer?
RadioShack operates 4300 stores in the United States and 270 stores in Mexico. It also has about 1,000 dealer and other outlets worldwide.
On July 1, RadioShack opened up a new concept store on Manhattan's Upper West Side which aims to highlight popular tech devices from Apple, Samsung and the others. There is more hands on testing capabilities.
Over the next several weeks, RadioShack also expects to open up different store prototypes across the New York area, including New Jersey, and also in Texas. Data from the response to the new stores will be used in determining which of the other 4300 stores across the U.S. will get reconfigured.
The company is undergoing changes at the hands of new CEO Joseph Magnacca, who came to RadioShack in February 2013 from Walgreens. He instituted a 100 day plan to turn it around. He is behind the recent concept store changes but he needs time to implement the changes.
How Much Time Does RadioShack Have?
On Apr 23, RadioShack reported its first quarter results which were pretty dismal. Comparable same store sales fell 5.7%. Inventory was up 27% and margins eroded.
RadioShack expected continued weakness in first half of 2013. It's scheduled to report second quarter results on July 24 so further details will soon be forthcoming.
For now, however, there is no end in sight to the earnings losses. The company is expected to lose 76 cents in 2013 and another 51 cents in 2014.
Green Mountain Upped to Strong Buy
On Jul 9, 2013, Zacks Investment Research upgraded Green Mountain Coffee Roasters Inc. (GMCR - Analyst Report)-Free Report) to a Zacks Rank #1 (Strong Buy) as it has secured numerous strategic alliances with other beverage giants for its single-serve Keurig brewers and K-cups.
Why the Upgrade?
Since March 2013 Green Mountain is roping in more and more beverage giants into its Keurig distribution system to increase the popularity of this single serve brewer. In March 2013, it formed a strategic alliance with Unilever plc.(UL - Analyst Report)-Free Report) under which the Lipton iced teas will be available in the K-cups of GMCR’s Keurig business unit. Again, in May 2013, the coffee giant joined forces with The Coffee Bean & Tea Leaf to launch the Coffee Bean & Tea Leaf K-Cup for Keurig single-cup.
Green Mountain aims to popularize the single-cup brewing system in America and has therefore, entered into several strategic distribution agreements to rope in popular brands like Dunkin’ Brands Group Inc. (DNKN - Analyst Report)-Free Report).
Through these agreements, Green Mountain is aligning with the strongest beverage brands to support a range of consumer choices and taste profiles in Keurig Single-Cup Brewing system.
Estimates were mostly revised upwards following the strategic alliances of the company and its effort to gear up the Keurig brewer and K-cups. For fiscal 2013, the estimate moved up 1.0% to $3.16 over the last 60 days. The Zacks Consensus Estimate for fiscal 2014 increased 2.0% to $3.56 over the same period.
Green Mountain also gave an encouraging outlook for the third quarter of fiscal 2013, when it expects earnings per share in the range of 71 cents – 78 cents and sales growth in the range of 11% to 15%. The guidance reflects the company’s continuous efforts to increase brand investments and product innovations.
Moreover, GMCR delivered a stellar second-quarter fiscal 2013 earnings (announced on May 09, 2013) on the back of solid top line growth during the quarter. The results were ahead of both the year-over-year results as well as the Zacks Consensus Estimate.
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