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Flowers Foods' (FLO) Strategic Priorities Aid Amid Cost Woes
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Flowers Foods, Inc. (FLO - Free Report) appears well-placed due to its strategic priorities. Also, strong pricing efforts have been working well for the company amid cost inflation. However, Flowers Foods is battling major hurdles due to high costs and supply-chain bottlenecks.
What’s Working Well for Flowers Foods?
The company has been on track with its core priorities, which include developing its team, concentrating on brands, prioritizing margins and looking out for prudent mergers and acquisitions. To this end, management has been shifting its focus toward becoming a more brand-focused company.
FLO expects its optimized portfolio to drive market share gains through innovation. The company is focused on undertaking innovation in its leading brands, which is likely to aid growth.
Moving to margins, Flowers Foods is undertaking pricing and saving measures and efforts to enhance business efficiency. It expects savings in the band of $20-$30 million in 2023. Apart from this, the company is on track with digital transformation and supply-chain efforts.
Flowers Foods has been focusing on acquisitions to strengthen its product portfolio and expand in untapped markets. The company has acquired more than 100 companies since 1968 and believes that there’s still potential with respect to M&A activities. In February 2023, FLO acquired Papa Pita Bakery, which will run as an independent subsidiary.
Additionally, brands like DKB, Nature's Own and Canyon Bakehouse brands continue to perform well. In the fourth quarter of 2022, Nature’s Own, Dave’s Killer Bread and Canyon Bakehouse maintained their unit share, even amid an inflationary landscape.
Flowers Foods, Inc. Price, Consensus and EPS Surprise
In the fourth quarter of fiscal 2022, materials, supplies, labor and other production costs (excluding depreciation and amortization) escalated by 110 basis points (bps) to 53.2%. This resulted from input cost inflation. Increased ingredient and packaging expenses led the gross margin to contract 110 bps to 46.8%.
On its fourth-quarter earnings call, Flowers Foods stated that it expects inflation to be high but is likely to decline in 2023. Along with flour, the company is seeing increased cost pressure across nearly all the categories of ingredients, natural gas and packaging.
Flowers Foods also expects the possibilities of a recession during the year. The company expects costs related to upgrading its ERP system to peak in 2023, which is likely to affect the adjusted EBITDA by nearly 9 cents. Additionally, management anticipates a rise in depreciation and amortization in 2023 compared with the 2023 level.
Management is undertaking price hikes and enhancing the profitability of lower-margin products, among other efforts to counter these headwinds. In the fourth quarter of fiscal 2022, the pricing/mix increased 16.7%. Favorable pricing efforts boosted sales in both branded retail and other channels. Impressive pricing and portfolio strategies, along with enhanced efficiencies, have been helping the company mitigate various inflationary and supply-chain pressures to generate better margins.
The continuation of the abovementioned upsides bodes well. For fiscal 2023, FLO expects sales in the range of $5.176-$5.242 billion, suggesting a rise of 7.7-9.1% year over year. Shares of this Zacks Rank #3 (Hold) company have risen 1.8% in the past three months compared with the industry’s growth of 2.3%.
Lamb Weston, which operates as a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year EPS suggests an increase of 111.1% from the year-ago reported number.
Post Holdings, a consumer-packaged goods holding company, currently sports a Zacks Rank #1. POST has a trailing four-quarter earnings surprise of 34.8%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings suggests growth of 2.2% and 112.5%, respectively, from the corresponding year-ago reported figures.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2 (Buy). CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests an increase of 7.1% and 16.1%, respectively, from the year-ago reported number.
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Flowers Foods' (FLO) Strategic Priorities Aid Amid Cost Woes
Flowers Foods, Inc. (FLO - Free Report) appears well-placed due to its strategic priorities. Also, strong pricing efforts have been working well for the company amid cost inflation. However, Flowers Foods is battling major hurdles due to high costs and supply-chain bottlenecks.
What’s Working Well for Flowers Foods?
The company has been on track with its core priorities, which include developing its team, concentrating on brands, prioritizing margins and looking out for prudent mergers and acquisitions. To this end, management has been shifting its focus toward becoming a more brand-focused company.
FLO expects its optimized portfolio to drive market share gains through innovation. The company is focused on undertaking innovation in its leading brands, which is likely to aid growth.
Moving to margins, Flowers Foods is undertaking pricing and saving measures and efforts to enhance business efficiency. It expects savings in the band of $20-$30 million in 2023. Apart from this, the company is on track with digital transformation and supply-chain efforts.
Flowers Foods has been focusing on acquisitions to strengthen its product portfolio and expand in untapped markets. The company has acquired more than 100 companies since 1968 and believes that there’s still potential with respect to M&A activities. In February 2023, FLO acquired Papa Pita Bakery, which will run as an independent subsidiary.
Additionally, brands like DKB, Nature's Own and Canyon Bakehouse brands continue to perform well. In the fourth quarter of 2022, Nature’s Own, Dave’s Killer Bread and Canyon Bakehouse maintained their unit share, even amid an inflationary landscape.
Flowers Foods, Inc. Price, Consensus and EPS Surprise
Flowers Foods, Inc. price-consensus-eps-surprise-chart | Flowers Foods, Inc. Quote
Cost Hurdles to be Countered?
In the fourth quarter of fiscal 2022, materials, supplies, labor and other production costs (excluding depreciation and amortization) escalated by 110 basis points (bps) to 53.2%. This resulted from input cost inflation. Increased ingredient and packaging expenses led the gross margin to contract 110 bps to 46.8%.
On its fourth-quarter earnings call, Flowers Foods stated that it expects inflation to be high but is likely to decline in 2023. Along with flour, the company is seeing increased cost pressure across nearly all the categories of ingredients, natural gas and packaging.
Flowers Foods also expects the possibilities of a recession during the year. The company expects costs related to upgrading its ERP system to peak in 2023, which is likely to affect the adjusted EBITDA by nearly 9 cents. Additionally, management anticipates a rise in depreciation and amortization in 2023 compared with the 2023 level.
Management is undertaking price hikes and enhancing the profitability of lower-margin products, among other efforts to counter these headwinds. In the fourth quarter of fiscal 2022, the pricing/mix increased 16.7%. Favorable pricing efforts boosted sales in both branded retail and other channels. Impressive pricing and portfolio strategies, along with enhanced efficiencies, have been helping the company mitigate various inflationary and supply-chain pressures to generate better margins.
The continuation of the abovementioned upsides bodes well. For fiscal 2023, FLO expects sales in the range of $5.176-$5.242 billion, suggesting a rise of 7.7-9.1% year over year. Shares of this Zacks Rank #3 (Hold) company have risen 1.8% in the past three months compared with the industry’s growth of 2.3%.
Food Stocks Worth a Look
Some better-ranked food stocks are Lamb Weston (LW - Free Report) , Post Holdings (POST - Free Report) and Conagra Brands (CAG - Free Report) .
Lamb Weston, which operates as a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year EPS suggests an increase of 111.1% from the year-ago reported number.
Post Holdings, a consumer-packaged goods holding company, currently sports a Zacks Rank #1. POST has a trailing four-quarter earnings surprise of 34.8%, on average.
The Zacks Consensus Estimate for Post Holdings’ current fiscal-year sales and earnings suggests growth of 2.2% and 112.5%, respectively, from the corresponding year-ago reported figures.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2 (Buy). CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests an increase of 7.1% and 16.1%, respectively, from the year-ago reported number.