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Flowers Foods (FLO) Q4 Earnings Beat Estimates, Sales Up Y/Y
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Flowers Foods, Inc. (FLO - Free Report) released fourth-quarter 2018 results, with the top and the bottom line beating the Zacks Consensus Estimate. Also, the top line improved year over year. Results benefited from strong brands. However, earnings declined from the year-ago quarter’s tally due to high costs. Further, management provided view for 2019. Let’s take a closer look.
Earnings & Sales
Adjusted earnings per share (EPS) of 16 cents beat the Zacks Consensus Estimate of 15 cents. However, the bottom line declined 5.7% year over year. The quarter’s performance was hurt by commodity inflation, transportation and other industry related headwinds.
Nevertheless, net sales inched up 0.8% year over year to $880.7 million and beat the Zacks Consensus Estimate of $866.7 million. Sales gained from strong performance of brands such as Nature's Own, Wonder and Dave's Killer Bread. Moreover, sales in the Direct-Store-Delivery (DSD) segment also improved in the quarter.
Flowers Foods, Inc. Price, Consensus and EPS Surprise
Adjusted EBITDA declined 14.1% to $78.1 million, whereas adjusted EBITDA margin contracted 150 basis points (bps) to 8.9%.
Materials, labor, supplies and other production expenses (net of depreciation and amortization) as a percentage of sales expanded 70 bps to 53%. This was mainly associated with elevated commodity costs, lower production volumes, greater purchases of outside products (mainly DKB breakfast items) and lower manufacturing efficiencies. These downsides were partially compensated by reduced workforce costs.
Selling, distribution and administrative expenses increased 20 bps to 38.5% of sales owing to increased distributor fees and Canyon Bakehouse acquisition costs. These were partially offset by reduced workforce-related expenses as well as lower Project Centennial consulting expenses and legal settlements.
Category Performance
Consolidated branded retail sales increased 2.3% to $519 million, backed by gains from DKB organic products, Nature's Own Perfectly Crafted breads, improved price/mix and growth in the expansion markets. These were offset by soft volumes in specialty breads, white breads, sandwich buns and rolls.
Store branded retail sales increased 5.2% to $134 million owing to better price/mix and volumes.
Non-retail and other sales dropped 4.7% to $227.6 million due to lower foodservice and vending volumes, somewhat compensated by favorable price/mix.
Segments
Sales in the DSD segment rose 1.2% year over year to $747.7 million on the back of higher branded retail sales and store branded retail sales. The upside was offset by decline in non-retail and other sales. Adjusted EBITDA tumbled 14.9% to $75.4 million.
Sales in the Warehouse segment slipped 1.5% from the year-ago quarter’s tally to $133 million due to softness in most categories. Adjusted EBITDA increased 3.2% to $12.8 million.
More Financial Aspects
Flowers Foods ended the quarter with cash and cash equivalents of $25.3 million as well as long-term debt and capital leases (including current portion) of $1001.5 million. Further, stockholders’ equity amounted to $1,258.3 million.
During the fourth quarter, the company’s cash flow from operating activities amounted to $63.8 million, while it incurred capital expenditures of $24.4 million. Also, Flowers Foods paid dividends worth $38 million during the quarter at the end of which, the company had 6.5 million shares remaining under the ongoing repurchase program.
Other Developments & Guidance
Management is on track with strategic actions under Project Centennial and is accordingly undertaking efforts to revive the core business, lower costs, make use of product adjacencies and develop leading capacities. Progress made on Project Centennial in 2018 includes the introduction of products, acquisition of Canyon Bakehouse, refinement of organizational structure, and development of a trade promotion management system. Further, the company also realized savings of more than $48 million.
Moreover, management is on track with productivity and revenue management efforts to counter inflationary pressures. It is also augmenting supply chain efficiencies to reduce costs. We note that such efforts to boost performance have been fueling investors’ sentiments. Notably, shares of the Zacks Rank #3 (Hold) company gained 6.5% in the past six months, against the industry’s decline of 5.1%.
All said, for 2019, management expects sales in the range of $4.030-$4.109 billion, reflecting 2-4% growth. EPS is projected between 94 cents and $1.02, whose mid-point of 98 cents is currently above the Zacks Consensus Estimate of 97 cents
Nomad Foods (NOMD - Free Report) , with long-term EPS growth rate of 11%, carries a Zacks Rank #2.
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term EPS growth rate of 12%.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
Image: Bigstock
Flowers Foods (FLO) Q4 Earnings Beat Estimates, Sales Up Y/Y
Flowers Foods, Inc. (FLO - Free Report) released fourth-quarter 2018 results, with the top and the bottom line beating the Zacks Consensus Estimate. Also, the top line improved year over year. Results benefited from strong brands. However, earnings declined from the year-ago quarter’s tally due to high costs. Further, management provided view for 2019. Let’s take a closer look.
Earnings & Sales
Adjusted earnings per share (EPS) of 16 cents beat the Zacks Consensus Estimate of 15 cents. However, the bottom line declined 5.7% year over year. The quarter’s performance was hurt by commodity inflation, transportation and other industry related headwinds.
Nevertheless, net sales inched up 0.8% year over year to $880.7 million and beat the Zacks Consensus Estimate of $866.7 million. Sales gained from strong performance of brands such as Nature's Own, Wonder and Dave's Killer Bread. Moreover, sales in the Direct-Store-Delivery (DSD) segment also improved in the quarter.
Flowers Foods, Inc. Price, Consensus and EPS Surprise
Flowers Foods, Inc. Price, Consensus and EPS Surprise | Flowers Foods, Inc. Quote
Costs & Margins
Adjusted EBITDA declined 14.1% to $78.1 million, whereas adjusted EBITDA margin contracted 150 basis points (bps) to 8.9%.
Materials, labor, supplies and other production expenses (net of depreciation and amortization) as a percentage of sales expanded 70 bps to 53%. This was mainly associated with elevated commodity costs, lower production volumes, greater purchases of outside products (mainly DKB breakfast items) and lower manufacturing efficiencies. These downsides were partially compensated by reduced workforce costs.
Selling, distribution and administrative expenses increased 20 bps to 38.5% of sales owing to increased distributor fees and Canyon Bakehouse acquisition costs. These were partially offset by reduced workforce-related expenses as well as lower Project Centennial consulting expenses and legal settlements.
Category Performance
Consolidated branded retail sales increased 2.3% to $519 million, backed by gains from DKB organic products, Nature's Own Perfectly Crafted breads, improved price/mix and growth in the expansion markets. These were offset by soft volumes in specialty breads, white breads, sandwich buns and rolls.
Store branded retail sales increased 5.2% to $134 million owing to better price/mix and volumes.
Non-retail and other sales dropped 4.7% to $227.6 million due to lower foodservice and vending volumes, somewhat compensated by favorable price/mix.
Segments
Sales in the DSD segment rose 1.2% year over year to $747.7 million on the back of higher branded retail sales and store branded retail sales. The upside was offset by decline in non-retail and other sales. Adjusted EBITDA tumbled 14.9% to $75.4 million.
Sales in the Warehouse segment slipped 1.5% from the year-ago quarter’s tally to $133 million due to softness in most categories. Adjusted EBITDA increased 3.2% to $12.8 million.
More Financial Aspects
Flowers Foods ended the quarter with cash and cash equivalents of $25.3 million as well as long-term debt and capital leases (including current portion) of $1001.5 million. Further, stockholders’ equity amounted to $1,258.3 million.
During the fourth quarter, the company’s cash flow from operating activities amounted to $63.8 million, while it incurred capital expenditures of $24.4 million. Also, Flowers Foods paid dividends worth $38 million during the quarter at the end of which, the company had 6.5 million shares remaining under the ongoing repurchase program.
Other Developments & Guidance
Management is on track with strategic actions under Project Centennial and is accordingly undertaking efforts to revive the core business, lower costs, make use of product adjacencies and develop leading capacities. Progress made on Project Centennial in 2018 includes the introduction of products, acquisition of Canyon Bakehouse, refinement of organizational structure, and development of a trade promotion management system. Further, the company also realized savings of more than $48 million.
Moreover, management is on track with productivity and revenue management efforts to counter inflationary pressures. It is also augmenting supply chain efficiencies to reduce costs. We note that such efforts to boost performance have been fueling investors’ sentiments. Notably, shares of the Zacks Rank #3 (Hold) company gained 6.5% in the past six months, against the industry’s decline of 5.1%.
All said, for 2019, management expects sales in the range of $4.030-$4.109 billion, reflecting 2-4% growth. EPS is projected between 94 cents and $1.02, whose mid-point of 98 cents is currently above the Zacks Consensus Estimate of 97 cents
Greedy for Consumer Staples Stocks? Check These
Church & Dwight Co., Inc (CHD - Free Report) , with long-term EPS growth rate of 9.8%, carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nomad Foods (NOMD - Free Report) , with long-term EPS growth rate of 11%, carries a Zacks Rank #2.
Lamb Weston (LW - Free Report) , with a Zacks Rank #2, has long-term EPS growth rate of 12%.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
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