Flowers Foods, Inc. (FLO - Free Report) is scheduled to release second-quarter 2018 results on Aug 8. The company’s earnings came in line with the Zacks Consensus Estimate in the last reported quarter, though it outperformed the same by an average of 9.1% in the trailing four quarters.
Let’s delve deep and see what’s in store for the company this time around.
Factors Driving the Quarter
Flowers Foods is set to gain from strength of its brands, focus on cost savings and efforts to enhance supply-chain structure. Incidentally, the company is on track with its Project Centennial, which includes increasing focus on consumers and simplifying costs. The project is aimed at augmenting sales and margins of the company.
Notably, Flowers Foods’ restructuring activities are working well, as these are helping the company build a structure that is more cost effective and efficient. To this end, management is focused on growing core brands, enhancing productivity and exploiting opportunities in underdeveloped regions and product categories. These efforts helped Flowers Foods achieve solid earnings and sales growth in the last reported quarter, even amid input cost inflation.
The company’s brands continued to perform well, despite the company raising prices of certain items to counter input cost inflation. Talking of strong brands, the company remains poised to gain from its breakfast segment, which has doubled its market share since last year’s launch of Dave’s Killer Bread (DKB) breakfast items. Also, Flowers Foods introduced a line of artisan style bakery breads toward the beginning of the second quarter, which should help drive sales further.
Hurdles in Flowers Foods’ Way
However, the performance of the company’s cake business is not all that impressive and management is taking actions to improve the same. To this end, Flowers Foods is streamlining its product range, making innovations, undertaking price rationalization, rightsizing capacity and making investments to drive production efficiency. However, it remains to be seen if these endeavors can boost results in the quarter to be reported.
Also, the company remains exposed to input cost inflation, which is likely to remain a headwind throughout this year. Evidently, management expects input cost inflation of nearly $40 million this year, largely owing to a tight labor market. Also, outside purchases to facilitate DKB’s growth remain a pressure on margins. These factors along with intense competition and promotional activities remain concerns. Nonetheless, we expect benefits from Project Centennial, supply-chain initiatives, other cost-saving actions and efficient pricing to help the company counter these hurdles.
What to Expect?
The Zacks Consensus Estimate for Flowers Foods’ earnings has remained stable over the past 30 days at 28 cents, which reflects a 16.7% increase from the year-ago period figure. Further, the Zacks Consensus Estimate for sales of $937 million indicates year-over-year growth of 1.1%.
What Does the Zacks Model Unveil?
However, our proven model doesn’t show thatFlowers Foods is likely to beat bottom-line estimates this quarter. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Though Flowers Foods has an Earnings ESP of +3.57%, the company currently carries a Zacks Rank #4 (Sell).
Well, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into earnings announcement.
Stocks Poised to Beat Earnings Estimates
Here are some better-ranked companies you may want to consider, as our model shows that these have the right combination of elements to post earnings beat:
Dean Foods (DF - Free Report) , a Zacks #2 Ranked company, has an Earnings ESP of +11.63%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ollie's Bargain (OLLI - Free Report) has an Earnings ESP of +1.57% and a Zacks Rank of 2.
Estee Lauder (EL - Free Report) has an Earnings ESP of +1.31% and a Zacks Rank of 3.
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