Flowers Foods, Inc. FLO focuses on acquisitions to strengthen its product portfolio and expand in untapped markets. Keeping along these lines, the leading producer of packaged bakery foods signed an agreement to acquire Papa Pita Bakery.
We note that Papa Pita Bakery manufactures and distributes high-quality tortillas, bagels, buns, breads, English muffins and flatbreads. Management expects to conclude the transaction in the first quarter of 2023. Flowers Foods will fund the transaction with cash on hand and available credit facilities. Certainly, the acquisition will create manufacturing and distribution synergies and widen geographic reach.
What Else Should You Know?
Flowers Foods acquired more than 100 companies since 1968 and believes there’s still plenty of potential with respect to M&A activities. In December 2018, the company acquired Canyon Bakehouse, which has helped Flowers Foods foray into the growing gluten-free bakery space. Well, Flowers Foods has successfully integrated Canyon Bakehouse, which is yielding positive results. In 2015, the company bought Dave’s Killer Bread (DKB) and Alpine Valley Bread company. With the acquisition of DKB, the company got access to the Pacific Northwest market. Brands like DKB, Nature's Own and Canyon Bakehouse brands continue to perform well.
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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 toward becoming a more brand-focused company. The company expects its optimized portfolio to drive market share gains through innovation. The company is focused on undertaking innovation in its leading brands, which will likely aid growth.
Moving to margins, the company’s brand-building efforts, such as shifting a larger proportion of the sales mix to branded retail, are aiding performance. The company is also undertaking saving measures and efforts to enhance business efficiency. Flowers Foods’ has been benefiting from its pricing efforts for a while now.
Such well-chalked efforts, including the latest acquisition, will likely keep supporting Flowers Foods’ growth story.
Shares of this Zacks Rank #3 (Hold) company have increased 16% in the past six months compared with the industry’s 13.4% growth.
3 Solid Staple Picks
Some top-ranked stocks are The Chef's Warehouse CHEF, Conagra Brands CAG and The J. M. Smucker Company SJM.
The Chef's Warehouse, which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). Chef's Warehouse has a trailing four-quarter earnings surprise of 93.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial year sales suggests growth of 46.5% from the year-ago reported number, while earnings indicate significant growth.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the corresponding year-ago reported figures.
The J. M. Smucker, which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 18.5%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year sales suggests growth of 5.6% from the year-ago reported figure.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
