Flowers Foods (FLO) Q3 Earnings Top Estimates, Sales View Up

Flowers Foods, Inc. FLO reported third-quarter fiscal 2022 results, with the top and bottom lines beating the Zacks Consensus Estimate and the former increasing year over year. The top line increased due to growth in Branded retail, Store branded retail, and Non-retail and other sales. Quarterly sales benefited from pricing actions to counter increased inflation.

Management remains focused on sustaining its solid momentum via increased innovation and marketing. The company’s launch of Dave's Killer Bread snack bars in 2023 is likely to mark a step on the innovation path. Management raised the lower end of its sales guidance for fiscal 2022.

Q3 Highlights

Adjusted earnings per share (EPS) of 30 cents surpassed the Zacks Consensus Estimate and our estimate of 28 cents. The bottom line remained in line with the figure reported in the year-ago period.

Flowers Foods, Inc. Price, Consensus and EPS Surprise

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

Sales increased 12.7% year over year to $1,158.2 million, beating the Zacks Consensus Estimate of $1,144 million and our estimate of $1,142 million. The pricing/mix remained favorable by 17.8%, while volumes fell by 5.1%. The Zacks Consensus Estimate was pegged at $1,144 million.

Branded retail sales grew 8.6% to $748.4 million, mainly on improved prices undertaken to counter inflationary pressures and enhanced promotional efficiency. These were somewhat offset by volume declines.

Store-branded retail sales surged 31.5% to $163.9 million on favorable prices. Increased volumes, net of planned sales rationalization, were also an upside.

Non-retail and other sales jumped 14.8% to $245.8 million, mainly driven by increased pricing. This was somewhat offset by soft foodservice volumes stemming from planned sales rationalization and production limitations due to supply-chain hurdles.

Costs & Margins

Materials, supplies, labor and other production costs (excluding depreciation and amortization) escalated by 310 basis points (bps) to 53.2%. This resulted from input cost inflation, partly mitigated by inflation-induced pricing.

Selling, distribution and administrative (SD&A) expenses came in at 38.6% of sales, down 290 bps due to price increases, decreased employee fringe costs, reduced legal settlement and consulting costs and lower distributor distribution fees as a percentage of sales. These factors were somewhat offset by acquisition-related costs. Adjusted SD&A expenses contracted 200 bps to 36.4% of sales.

Adjusted EBITDA advanced 1.6% to $120.4 million. The adjusted EBITDA margin was 10.4%, which contracted 110 bps.

Financial Aspects

Flowers Foods ended the reported quarter with cash and cash equivalents of $172.7 million and long-term debt of $891.5 million. Stockholders’ equity amounted to $1,434.8 million.

Year to date, through the end of the third quarter of 2022, FLO’s cash flow from operating activities amounted to $291.5 million, while capital expenditures were $128.4 million. Flowers Foods paid out dividends worth $140.1 million during this period.

In the second quarter of fiscal 2022, the company increased its share repurchase authorization by 20 million shares. Year to date, it repurchased $34.6 million shares. The company has 24.4 million shares remaining under its repurchase plan as of the third-quarter earnings call.

Meanwhile, capital expenditures are projected in the range of $150-$160 million for fiscal 2022.

Guidance

For fiscal 2022, the adjusted EPS is envisioned in the range of $1.25-$1.30.

For fiscal 2022, the company now expects sales in the range of $4.807-$4.850 billion, suggesting a rise of 11-12% year over year. Earlier, the company projected sales in the band of $4.764-$4.850 billion, indicating an increase of around 10-12% year over year.

Shares of this Zacks Rank #3 (Hold) company have increased 15.3% in the past year compared with the industry’s 1.6% growth.

Looking for Consumer Staple Stocks? Check These

Some better-ranked stocks from the sector are Lamb Weston LW, The J.M. Smucker SJM and Conagra Brands CAG.

Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.3%, 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 financial-year sales and earnings suggests growth of 14.6% and 45.7%, respectively, from the year-ago reported numbers.

The J.M. Smucker, which manufactures and markets branded food and beverage products, sports a Zacks Rank #1 at present. The J.M. Smucker has a trailing four-quarter earnings surprise of 20.8%, on average.

The Zacks Consensus Estimate for SJM’s current financial-year sales suggests growth of 4.6% from the year-ago reported number.

Conagra Brands, which operates 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 EPS suggests growth of 5.2% and around 3%, respectively, from the corresponding year-ago reported figures.

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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.