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Flowers Foods, Inc. (FLO - Free Report) posted better-than-expected third-quarter 2020 results, wherein the top and bottom lines increased year over year. The company benefited from the rising trend of stay-at-home eating. Going ahead, management remains optimistic about stay-at-home food demand. Also, the company’s supply-chain initiatives, product optimization and restructuring actions are likely to help it stay afloat amid this crisis. Encouragingly, Flower Foods lifted its 2020 view.
Notably, shares of this Zacks Rank #3 (Hold) company have gained 4.3% in the past three months against the industry’s decline of 1.4%.
Q3 in Detail
Adjusted EPS of 29 cents came ahead of the Zacks Consensus Estimate of 25 cents. Moreover, the bottom line increased 32% year over year.
Sales grew 2.4% to $989.7 million, which beat the Zacks Consensus Estimate of $977 million. Notably, increased demand owing to the coronavirus pandemic contributed to this growth. Higher branded retail sales helped offset the decline in store-branded retail sales, and non-retail and other sales. While pricing/mix increased 8.1%, volumes dropped 5.7%.
Costs & Margins
Materials, labor, supplies and other production expenses (net of depreciation and amortization), as a percentage of sales, contracted 240 basis points (bps) year over year to 50.3%. This can be attributed to favorable shifts in mix from non-retail and store-branded retail products to branded retail products.
Adjusted selling, distribution and administrative expenses (as a percentage of sales) rose 50 bps to 38%, courtesy of increased distribution fees and escalated employee-incentive costs. These were partly offset by reduced logistics expenses, a decline in fuel expenses and supply-chain optimization.
Adjusted EBITDA rose 22.4% to $116.4 million, whereas adjusted EBITDA margin expanded 200 bps to 11.8%.
Flowers Foods, Inc. Price, Consensus and EPS Surprise
Branded retail sales rose 12.2% to $657.1 million in the quarter under review. Meanwhile, store-branded retail sales fell 9.5% to $136.6 million, whereas non-retail and other sales declined 14.7% to $196 million.
More Financial Aspects
The company ended the quarter with cash and cash equivalents of $325.8 million and long-term debt of $1,009.8 million. Further, stockholders’ equity amounted to $1,351.5 million.
In the nine months ending Oct 3, 2020, the company’s cash flow from operating activities amounted to $364.4 million, while it incurred capital expenditures of $68.3 million. Capital expenditures are still projected in the range of $85-$95 million for 2020.
Flowers Foods paid out dividends worth $124.9 million in the aforementioned period and has 6.2 million shares remaining under the ongoing repurchase program.
Guidance
Notably, the company intends to stay committed to enhancing its portfolio and supply chain that are anticipated to deliver more than $20 million in savings in 2020.
Management now projects sales of roughly $4.35-$4.37 billion for 2020, suggesting growth of about 5.5-6% year over year. Earlier, it expected sales in the band of $4.29-$4.33 billion, which indicated 4-5% growth from the year-ago period’s reported figure.
Adjusted EPS is now envisioned to be $1.23-$1.28, indicating growth of about 28.1-33.3% from the year-ago period. This guidance is above the earlier-projected range of $1.15-$1.25 per share, which suggested an improvement of 19.8-30.2% year over year. Moreover, the Zacks Consensus Estimate for 2020 earnings is currently pegged at $1.22, which is below the currently guided range.
The company expects net interest expenses of about $11 million and an effective tax rate of nearly 24-24.5% for the year.
Lamb Weston Holdings (LW - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2 (Buy).
Grocery Outlet Holdings (GO - Free Report) , with a Zacks Rank #2, has a long-term earnings growth rate of 14.3%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Flowers Foods (FLO) Ups View on Q3 Earnings & Sales Beat
Flowers Foods, Inc. (FLO - Free Report) posted better-than-expected third-quarter 2020 results, wherein the top and bottom lines increased year over year. The company benefited from the rising trend of stay-at-home eating. Going ahead, management remains optimistic about stay-at-home food demand. Also, the company’s supply-chain initiatives, product optimization and restructuring actions are likely to help it stay afloat amid this crisis. Encouragingly, Flower Foods lifted its 2020 view.
Notably, shares of this Zacks Rank #3 (Hold) company have gained 4.3% in the past three months against the industry’s decline of 1.4%.
Q3 in Detail
Adjusted EPS of 29 cents came ahead of the Zacks Consensus Estimate of 25 cents. Moreover, the bottom line increased 32% year over year.
Sales grew 2.4% to $989.7 million, which beat the Zacks Consensus Estimate of $977 million. Notably, increased demand owing to the coronavirus pandemic contributed to this growth. Higher branded retail sales helped offset the decline in store-branded retail sales, and non-retail and other sales. While pricing/mix increased 8.1%, volumes dropped 5.7%.
Costs & Margins
Materials, labor, supplies and other production expenses (net of depreciation and amortization), as a percentage of sales, contracted 240 basis points (bps) year over year to 50.3%. This can be attributed to favorable shifts in mix from non-retail and store-branded retail products to branded retail products.
Adjusted selling, distribution and administrative expenses (as a percentage of sales) rose 50 bps to 38%, courtesy of increased distribution fees and escalated employee-incentive costs. These were partly offset by reduced logistics expenses, a decline in fuel expenses and supply-chain optimization.
Adjusted EBITDA rose 22.4% to $116.4 million, whereas adjusted EBITDA margin expanded 200 bps to 11.8%.
Flowers Foods, Inc. Price, Consensus and EPS Surprise
Flowers Foods, Inc. price-consensus-eps-surprise-chart | Flowers Foods, Inc. Quote
Category Performance
Branded retail sales rose 12.2% to $657.1 million in the quarter under review. Meanwhile, store-branded retail sales fell 9.5% to $136.6 million, whereas non-retail and other sales declined 14.7% to $196 million.
More Financial Aspects
The company ended the quarter with cash and cash equivalents of $325.8 million and long-term debt of $1,009.8 million. Further, stockholders’ equity amounted to $1,351.5 million.
In the nine months ending Oct 3, 2020, the company’s cash flow from operating activities amounted to $364.4 million, while it incurred capital expenditures of $68.3 million. Capital expenditures are still projected in the range of $85-$95 million for 2020.
Flowers Foods paid out dividends worth $124.9 million in the aforementioned period and has 6.2 million shares remaining under the ongoing repurchase program.
Guidance
Notably, the company intends to stay committed to enhancing its portfolio and supply chain that are anticipated to deliver more than $20 million in savings in 2020.
Management now projects sales of roughly $4.35-$4.37 billion for 2020, suggesting growth of about 5.5-6% year over year. Earlier, it expected sales in the band of $4.29-$4.33 billion, which indicated 4-5% growth from the year-ago period’s reported figure.
Adjusted EPS is now envisioned to be $1.23-$1.28, indicating growth of about 28.1-33.3% from the year-ago period. This guidance is above the earlier-projected range of $1.15-$1.25 per share, which suggested an improvement of 19.8-30.2% year over year. Moreover, the Zacks Consensus Estimate for 2020 earnings is currently pegged at $1.22, which is below the currently guided range.
The company expects net interest expenses of about $11 million and an effective tax rate of nearly 24-24.5% for the year.
Looking for Solid Food Stocks? Check These
Newell Brands (NWL - Free Report) has a long-term earnings growth rate of 2.9% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Lamb Weston Holdings (LW - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2 (Buy).
Grocery Outlet Holdings (GO - Free Report) , with a Zacks Rank #2, has a long-term earnings growth rate of 14.3%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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