Back to top

Analyst Blog

Zacks Equity Research

Flowers Foods Matches Estimate

CPB FLO

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Georgia-based Flowers Foods Inc. (FLO - Snapshot Report) recently reported first-quarter 2012 adjusted earnings of 28 cents per share, in line with the Zacks Consensus Estimate but down 15.2% from the year-ago level of 33 cents. The year-over-year decline in earnings was due to input cost pressure.

Total revenue perked up 12.0% year over year to $898.2 million, thanks to higher volume, favorable net/price mix and positive contribution from the acquisition of Tasty Baking Co. completed last year.

Quarter Highlights

The company operates under two segments Direct Store Delivery (DSD) and Warehouse and drives 80% of its revenue from the DSD segment. During the quarter, sales of the DSD segment increased 14.0% year over year to $737.3 million. Warehouse revenue jumped 3.8% to $160.9 million.

Gross margin plunged 190 bps year over year to 46.7%, due to higher ingredient and packaging costs. Selling, distribution and administrative expenses as a percentage of sales dipped 60 bps to 36.8%, benefiting from higher sales prices and lesser workforce-related costs. However, operating margin contracted 100 bps to 6.6% due to non-recurring expenses associated with the bakery closure and the Tasty acquisition.

Operating margin of the DSD segment fell 120 bps to 8.7% and the same at Warehouse segment dipped 130 bps to 6.0%.

During the quarter, Flowers Foods also unveiled its plans to expand itsOxford, Pennsylvania, bakery for bread production.

Financial Position

The company ended the quarter with cash flow from operations of $60.1 million, cash and cash equivalent of $186.1 million and share holders’ equity of $781.6 million. During the quarter, the company repurchased approximately 70,742 shares for $1.4 million.

In April, Packaged bakery Foods Company also issued senior notes, worth $400 million that will carry interest of 4.375% and are due to mature in 2022.

Outlook

The company has trimmed its earnings outlook for 2012 due to higher costs and interest expense. U.S. baker Flower Foods now expects earnings to rise 3.5% to 8%, less than its earlier growth projection of 7% to 12%.

Our Take

The company remains focused on expansion by acquisition, adding new bakeries and entering new markets. Additionally, continuous enhancement of shareholder value also augurs well. In a faltering economy, the company is streamlining operations and cutting less productive overhead in order to realize cost savings. However, input cost inflation and stiff competition continues to remain headwinds.

Flowers Foods, which competes with Campbell Soup Co. (CPB - Analyst Report), carries a Zacks #3 Rank, implying a short-term Hold rating. Besides, we are also maintaining our long-term Neutral recommendation on the stock.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 35.33 +14.82%
ANI PHARMACE ANIP 24.79 +14.66%
E HOUSECHINA EJ 10.99 +9.24%
CANADIAN SOL CSIQ 26.97 +7.15%
INTERNATIONA ICAGY 33.30 +5.38%