FLO Q3 Earnings Top, View Narrowed on Volatile Consumer Trends

Flowers Foods, Inc. FLO reported mixed third-quarter fiscal 2024 results, as the bottom line improved year over year and beat the Zacks Consensus Estimate while the top line declined and missed the consensus mark.This performance reflects the strength of its leading brands, effective cost initiatives and a strategic portfolio approach. Despite top-line pressure from external challenges, the company achieved solid margin improvements and robust bottom-line growth. Flowers Foods outpaced the bread category, with both unit and dollar sales rising in tracked channels, though sweet baked goods and fast-food business sales saw challenges.Management narrowed its fiscal 2024 guidance to indicate increased certainty as it approaches the fourth quarter. This guidance considers strong performance in the branded retail bread category, partly countered by challenges from shifting consumer and promotional behavior. However, the company expects to witness continued gains from recent business wins and efficiency initiatives.Flowers Foods’ Quarterly Performance: Key InsightsAdjusted earnings per share (EPS) of 33 cents beat the Zacks Consensus Estimate of 30 cents. The bottom line increased from 29 cents reported in the year-ago quarter.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Flowers Foods, Inc. Price, Consensus and EPS Surprise Flowers Foods, Inc. price-consensus-eps-surprise-chart | Flowers Foods, Inc. QuoteSales declined 0.7% year over year to $1,191 million due to external factors. The top line missed the Zacks Consensus Estimate of $1,200 million. Price/mix improved 1.7%, implying an optimization in non-retail segments like foodservice. Volumes dropped 2.4%, mainly in cake, foodservice and institutional sales. We estimated the price/mix to be up 0.7% and volumes to decline 0.5% in the third quarter.Branded retail sales inched down 1.5% to $760.6 million, due to unfavorable price/mix resulting from higher promotional activity and volume declines. Branded cake led the volume drop, though branded bread saw volume growth. The pricing/mix inched down 0.9%, sales volume decreased 0.6%. We anticipated the price/mix and volumes to be up 0.3% and 0.1% in the third quarter, respectively.Other sales inched up 0.7% to $430 million, driven by favorable price/mix from optimizing the non-retail business, particularly in foodservice, partially offset by volume declines concentrated in vending, foodservice and institutional sales. While pricing/mix improved 4.9%, volume declined 4.2%. We estimated the price/mix to be up 1.5% and volumes to decline 1.5% in the third quarter.    Our model expected Branded Retail sales growth of 0.4% and Other sales to remain flat in the quarter under review.Decoding FLO’s Costs & Margins PerformanceMaterials, supplies, labor and other production costs (exclusive of depreciation and amortization) contracted 130 basis points (bps) to 50.2% of sales on lower ingredient and packaging expenses, better sales price/mix and reduced product returns. However, this improvement was partially offset by lower production volumes, higher workforce-related and increased purchases of products from external sources.Selling, distribution and administrative (SD&A) expenses was 38.7% of sales, down 1,170 bps. This can be attributed to significantly reduced legal settlements and related costs, as well as decreased distributor distribution fees, marketing expenses, logistics and freight costs and consulting costs, among other reasons. However, these factors were somewhat offset by higher workforce-related costs, increased rent expenses and lower scrap dough income, among others. Adjusted SD&A expenses was 38.6% of sales, up 20 bps from the year-ago quarter. We had forecasted adjusted SD&A expenses to increase 30 bps to 38.7% of sales.Adjusted EBITDA climbed 10% to $133.3 million. The adjusted EBITDA margin was 11.2%, expanding 110 bps. We had anticipated an adjusted EBITDA margin increase of 60 bps to 10.7% for the quarter under review.FLO’s Financial SnapshotFLO ended its fiscal third quarter with cash and cash equivalents of nearly $15 million and long-term debt of $1,054.1 million. Stockholders’ equity at the quarter end was $1,406.5 million.Year to date, cash flow from operating activities totaled $282.4 million and capital expenditures were $86.6 million. The company paid out dividends worth $152.5 million during this time.Sneak Peek Into Flowers Foods' OutlookFor 2024, management now expects net sales in the range of $5.116-$5.147 billion, indicating 0.5% to 1.1% increase year over year. This forecast is revised from the previous guidance of $5.091-$5.172 billion, implying flat to a 1.6% increase year over year.Adjusted EBITDA is likely to be in the range of $530-$542 million compared with $524-$553 million projected earlier and $501.7 million recorded in fiscal 2023. For fiscal 2024, adjusted EPS is envisioned in the range of $1.24-$1.28 compared with the earlier view of $1.20-$1.30 and $1.20 delivered in fiscal 2023.Management expects depreciation and amortization in the range of $155-$160 million, while net interest expenses are likely to be $20-$24 million. For fiscal 2024, capital expenditures are expected to be in the range of $130-$140 million, revised from the previous guidance of $145-$155 million.The company anticipates that key factors influencing 2024 results within its guidance range include the consumer and promotional environment, the pace of new business growth, the transition of California distribution and the execution of savings initiatives.This Zacks Rank #3 (Hold) stock has lost 3.9% in the past three months against the industry growth of 0.2%.Image Source: Zacks Investment ResearchTop 3 PicksIngredion Incorporated INGR manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.INGR has a trailing four-quarter earnings surprise of 9.5%, on average. The Zacks Consensus Estimate for Ingredion’s current-financial year’s earnings indicates growth of 12.5% from the year-ago reported number.Freshpet Inc. FRPT manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings indicates growth of 27.3% and 224.3%, respectively, from the prior-year reported levels.McCormick & Company, Incorporated MKC is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry. It currently carries a Zacks Rank #2. MKC has a trailing four-quarter earnings surprise of 13.8%, on average.The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings indicates growth of 0.6% and 8.2%, respectively, from the prior-year reported levels.Free Report: 5 Clean Energy Stocks with Massive UpsideEnergy is the backbone of our economy. It’s a multi-trillion dollar industry that has created some of the world’s largest and most profitable companies.Now state-of-the-art technology is paving the way for clean energy sources to overtake “old-fashioned” fossil fuels. Trillions of dollars are already pouring into clean energy initiatives, from solar power to hydrogen fuel cells.Emerging leaders from this space could be some of the most exciting stocks in your portfolio.Download Nuclear to Solar: 5 Stocks Powering the Future to see Zacks’ top picks free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Freshpet, Inc. (FRPT): Free Stock Analysis Report McCormick & Company, Incorporated (MKC): Free Stock Analysis Report Flowers Foods, Inc. (FLO): Free Stock Analysis Report Ingredion Incorporated (INGR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks