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Flowers Foods (FLO) Stock Up on Q1 Earnings Beat & Sales Growth

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Flowers Foods, Inc.’s (FLO - Free Report) shares moved up almost 3.5% during after-hours on May 19, 2022, as it delivered impressive first-quarter fiscal 2022 results. Flowers Foods’ top and the bottom line increased year over year and surpassed the Zacks Consensus Estimate in the quarter. Branded, store-branded retail and non-retail and other sales rose year over year.

The company’s focused implementation on portfolio strategy fueled market share gains for leading brands, as consumers gravitate to such differentiated products even amid an inflationary environment. Flowers Foods is on track to sustain robust momentum with investments in marketing and advertising, the introduction of new and innovative products and expanding production capabilities. Management is adjusting its fiscal 2022 outlook to reflect higher pricing, more-than-anticipated inflation and supply chain disruptions.

Flowers Foods, Inc. Price and EPS Surprise

 

Flowers Foods, Inc. Price and EPS Surprise

Flowers Foods, Inc. price-eps-surprise | Flowers Foods, Inc. Quote

 

Q1 Highlights

Adjusted earnings per share (EPS) of 44 cents surpassed the Zacks Consensus Estimate of 38 cents. The bottom line increased from 41 cents reported in the year-ago quarter.

Sales increased 10.3% to $1,435.9 million and surpassed the Zacks Consensus Estimate of $1,405 million. Pricing/mix remained favorable by 13.5%, while volume fell by 3.2%.

Branded retail sales grew 11% to $956.1 million, mainly on the back of improved prices undertaken to counter inflationary pressures and better promotional efficiency. Volume declines in branded cake items were a downside.

Store branded retail sales increased 6.9% to $173.6 million on favorable prices. This was somewhat offset by soft volume, as consumer purchasing continued to shift toward branded retail products.

Non-retail and other sales jumped 10.2% to $306.2 million, mainly driven by increased pricing. However, unfavorable volume for fast food and co-manufactured products, supply chain disruptions and targeted sales rationalization were a downside.

Costs & Margins

Materials, supplies, labor and other production costs (excluding depreciation and amortization) escalated by 110 basis points (bps) to 50.5%. This resulted from increased ingredient and packaging expenses, somewhat negated by higher sales and lower outside purchases.

Selling, distribution and administrative (SD&A) expenses came in at 38.6% of sales, up 10 bps, thanks to escalated consulting costs and transportation cost inflation. These were largely countered by favorable price/mix, reduced workforce-related expenses and higher scrap dough income. Adjusted SD&A expenses were 38% of sales, a 20 bps decline.

Adjusted EBITDA grew 2.4% to $165.5 million. Adjusted EBITDA margin was 11.5%, which contracted 90 bps.

More Financial Aspects

Flowers Foods ended the reported quarter with cash and cash equivalents of $205.1 million and long-term debt of $891 million. Stockholders’ equity amounted to $1,459.4 million.

For the first quarter of fiscal 2022, FLO’s cash flow from operating activities amounted to $124.2 million, while capital expenditures were $50.5 million. Flowers Foods paid dividends worth $46.7 million.

The company has 5.4 million shares remaining under the ongoing repurchase program. Capital expenditures are projected in the range of $150-$160 million for fiscal 2022.

Zacks Investment Research
Image Source: Zacks Investment Research

Guidance

For fiscal 2022, the company expects sales in the range of $4.764-$4.850 billion, reflecting an increase of 10-12% year over year. Earlier, management expected sales for fiscal 2022 in the range of nearly $4.660-$4.695 billion, suggesting a 7.6-8.4% increase from the year-ago reported figure

For fiscal 2022, adjusted EPS is envisioned in the range of $1.20-$1.30. Management earlier expected adjusted EPS between $1.25 and $1.35.

The company has undertaken price increases to counter shortages and dynamic commodity prices. Management expects the pricing action to come into effect during the fiscal second quarter. Incidentally, the price lag and supply chain disruptions are likely to hurt EPS by 5 cents in the fiscal second and third quarters.     

Shares of this Zacks Rank #4 (Sell) company have dropped 12.3% in the past three months compared with the industry’s 5.3% decline.

3 Solid Food Stocks

Some better-ranked stocks are Pilgrim’s Pride (PPC - Free Report) , Sysco Corporation (SYY - Free Report) and Medifast (MED - Free Report) .

Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, sports a Zacks Rank #1 (Strong Buy). PPC has a trailing four-quarter earnings surprise of 31.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial year EPS suggests growth of 42.1% from the year-ago reported number.

Sysco, which engages in the marketing and distributing various food and related products, sports a Zacks Rank #1. SYY has a trailing four-quarter earnings surprise of 9.1%, on average.

The Zacks Consensus Estimate for Sysco’s current financial year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.

Medifast, which manufactures and distributes weight loss, weight management, healthy living products and other consumable health and nutritional products, currently carries a Zacks Rank #2 (Buy). MED has a trailing four-quarter earnings surprise of 12.9%, on average.

The Zacks Consensus Estimate for Medifast’s current financial year sales and EPS suggests growth of almost 19% and 11.5%, respectively, from the year-ago reported figure.

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