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Flowers Foods, Inc. (FLO - Free Report) remains well-positioned for growth and market leadership through strategic priorities and long-term goals. The company is focused on team development, brand concentration, margin improvement, and prudent mergers and acquisitions, aligning with evolving industry trends and consumer preferences. These upsides bode well amid cost-related challenges.
Challenges Aboard
Flowers Foods has been grappling with cost inflation. Volatility in commodity costs and elevated production expenses are areas of concern. The company’s selling, distribution and administrative (SD&A) expenses have been expanding as a percentage of sales on a year-over-year basis.
In the third quarter, SD&A expenses were 50.4% of sales, up 1,180 bps. This can mainly be attributed to increased legal settlement expenses. In addition, higher workforce-related costs, marketing investments and amortization of technology were hurdles. Adjusted SD&A expenses expanded 200 bps to 38.4% of sales. Flowers Foods’ increased focus on marketing and innovation behind brands is likely to increase its cost burden in the near term, though it is expected to drive long-term growth.
However, Flowers Foods is ahead of track with its savings plan and expects to achieve savings in the band of $30-$35 million in 2023.
Image Source: Zacks Investment Research
Growth Drivers in Place
Flowers Foods showcases commitment to innovation with successful launches like Dave's Killer Bread Snack Bars and upcoming releases of DKB protein bars and DKB snack bites. These initiatives are expected to drive market share gains and contribute to the success of Flowers Foods’ renowned brand, DKB.
Acquisitions have played a crucial role in Flowers Foods' growth trajectory. The recent acquisition of Papa Pita Bakery contributed to a 1.3% sales increase in the third quarter of 2023. With a history of more than 100 acquisitions since 1968, Flowers Foods continues to explore opportunities for mergers and acquisitions to strengthen its product portfolio and expand into new markets.
As a matter of fact, Flowers Foods is strategically transitioning its sales toward higher-margin branded retail products, which constituted 64.3% of sales in the third quarter of 2023. The pricing strategy has been another major driver, with a 6.3% increase in the pricing/mix in the third quarter of 2023. This, combined with efficient portfolio strategies, has allowed the company to navigate inflationary pressures and achieve better margins.
Wrapping Up
Flowers Foods has also been benefiting from its pricing efforts for a while now. Impressive pricing and portfolio strategies, along with enhanced efficiencies, position Flowers Foods well for growth. This Zacks Rank #3 (Hold) company's capability to navigate through the current challenges and capitalize on growth opportunities in the competitive market landscape reflects its overall stability.
Shares of FLO have risen 9.4% in the past three months compared with the industry’s growth of 12.4%.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and nearly 8%, respectively, from the year-ago reported numbers.
Ingredion Incorporated (INGR - Free Report) , which produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions, holds a Zacks Rank #2. INGR delivered a positive earnings surprise of 23.9% in the last reported quarter.
The Zacks Consensus Estimate for Ingredion Incorporated’s current financial-year sales and earnings suggests growth of around 5% and 24.7%, respectively, from the year-ago reported numbers.
Nomad Foods (NOMD - Free Report) manufactures, markets and distributes a range of frozen food products. It currently has a Zacks Rank #2. NOMD has a trailing four-quarter earnings surprise of 7.7%, on average.
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales suggests growth of 6.6% from the year-ago reported figure.
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Flowers Foods (FLO) Shows Solid Resilience Amid Complexities
Flowers Foods, Inc. (FLO - Free Report) remains well-positioned for growth and market leadership through strategic priorities and long-term goals. The company is focused on team development, brand concentration, margin improvement, and prudent mergers and acquisitions, aligning with evolving industry trends and consumer preferences. These upsides bode well amid cost-related challenges.
Challenges Aboard
Flowers Foods has been grappling with cost inflation. Volatility in commodity costs and elevated production expenses are areas of concern. The company’s selling, distribution and administrative (SD&A) expenses have been expanding as a percentage of sales on a year-over-year basis.
In the third quarter, SD&A expenses were 50.4% of sales, up 1,180 bps. This can mainly be attributed to increased legal settlement expenses. In addition, higher workforce-related costs, marketing investments and amortization of technology were hurdles. Adjusted SD&A expenses expanded 200 bps to 38.4% of sales. Flowers Foods’ increased focus on marketing and innovation behind brands is likely to increase its cost burden in the near term, though it is expected to drive long-term growth.
However, Flowers Foods is ahead of track with its savings plan and expects to achieve savings in the band of $30-$35 million in 2023.
Image Source: Zacks Investment Research
Growth Drivers in Place
Flowers Foods showcases commitment to innovation with successful launches like Dave's Killer Bread Snack Bars and upcoming releases of DKB protein bars and DKB snack bites. These initiatives are expected to drive market share gains and contribute to the success of Flowers Foods’ renowned brand, DKB.
Acquisitions have played a crucial role in Flowers Foods' growth trajectory. The recent acquisition of Papa Pita Bakery contributed to a 1.3% sales increase in the third quarter of 2023. With a history of more than 100 acquisitions since 1968, Flowers Foods continues to explore opportunities for mergers and acquisitions to strengthen its product portfolio and expand into new markets.
As a matter of fact, Flowers Foods is strategically transitioning its sales toward higher-margin branded retail products, which constituted 64.3% of sales in the third quarter of 2023. The pricing strategy has been another major driver, with a 6.3% increase in the pricing/mix in the third quarter of 2023. This, combined with efficient portfolio strategies, has allowed the company to navigate inflationary pressures and achieve better margins.
Wrapping Up
Flowers Foods has also been benefiting from its pricing efforts for a while now. Impressive pricing and portfolio strategies, along with enhanced efficiencies, position Flowers Foods well for growth. This Zacks Rank #3 (Hold) company's capability to navigate through the current challenges and capitalize on growth opportunities in the competitive market landscape reflects its overall stability.
Shares of FLO have risen 9.4% in the past three months compared with the industry’s growth of 12.4%.
3 Promising Food Bets
Sysco Corporation (SYY - Free Report) , a food and related product company, currently carries a Zacks Rank #2 (Buy). SYY delivered a back-to-back positive earnings surprise in the past two quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Sysco’s current fiscal-year sales and earnings suggests growth of 4.1% and nearly 8%, respectively, from the year-ago reported numbers.
Ingredion Incorporated (INGR - Free Report) , which produces and sells sweeteners, starches, nutrition ingredients and biomaterial solutions, holds a Zacks Rank #2. INGR delivered a positive earnings surprise of 23.9% in the last reported quarter.
The Zacks Consensus Estimate for Ingredion Incorporated’s current financial-year sales and earnings suggests growth of around 5% and 24.7%, respectively, from the year-ago reported numbers.
Nomad Foods (NOMD - Free Report) manufactures, markets and distributes a range of frozen food products. It currently has a Zacks Rank #2. NOMD has a trailing four-quarter earnings surprise of 7.7%, on average.
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales suggests growth of 6.6% from the year-ago reported figure.