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On Mar 22, Zacks Investment Research upgraded Flowers Foods Inc. (FLO - Snapshot Report) to a Zacks Rank #1 (Strong Buy). Shares of this bakery products producer have amassed an impressive return of 58.1% in the last six months.

Why the Upgrade?

Flowers Foods has been witnessing rising earnings estimates on the back of better-than-expected fourth-quarter 2012 results. The bakery goods producer’s earnings per share surpassed the Zacks Consensus Estimate for the first time after reporting in line earnings in 3 consecutive quarters. Moreover, we believe that the company’s strategy of expanding continuously through entering new markets, building new bakeries and acquisitions have helped induce an upward movement in the estimates.

Flowers Foods declared impressive results on Feb 7, 2013, wherein earnings of 28 cents a share surpassed the Zacks Consensus Estimate of 25 cents by 12.0%, and rose 64.7% from the year-ago quarter.

Net sales jumped 14.7% over the prior-year quarter to $749.4 million, and came ahead of the Zacks Consensus Estimate of $709 million. Volume increased of 10.3%, while net price/mix remained unfavorable at 2.0%. Gross margin expanded 200 basis points to 47.9%, benefiting from higher sales volumes and improved manufacturing efficiencies.

Further, the company has successfully expanded its reach of fresh bakery products from about 38% of U.S. population in 2004 to more than 70% now. Moreover, the company has a proven experience of integrating acquisitions, having completed more than 100 since 1968 and three significant ones in just the last three years – Tasty Baking, Lepage Bakeries, and the Sara Lee and Earthgrains brands in California.

The Zacks Consensus Estimate for fiscal 2013 increased 1.6% to $1.28 per share as most of the estimates were revised higher over the last 30 days. Moreover, for fiscal 2014, the estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 5.8% to $1.46 per share.

Other Stocks to Consider

Besides Flowers Foods, other stocks in the foods industry that are currently performing well include J&J Snack Foods Corp. (JJSF - Snapshot Report), which has a Zacks Rank #1 (Strong Buy), ConAgra Foods Inc. (CAG - Analyst Report) and Kraft Foods Group Inc. (KRFT - Analyst Report), both of which hold a Zacks Rank #2 (Buy).

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