Stock Story -
Packaged bakery food company Flower Foods (NYSE:FLO) fell short of analysts’ expectations in Q2 CY2024, with revenue flat year on year at $1.22 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $5.13 billion at the midpoint. It made a non-GAAP profit of $0.36 per share, improving from its profit of $0.33 per share in the same quarter last year.
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Flowers Foods (NYSE:FLO) Q2 CY2024 Highlights:
- Revenue: $1.22 billion vs analyst estimates of $1.24 billion (1.4% miss)
- EPS (non-GAAP): $0.36 vs analyst estimates of $0.33 (8% beat)
- The company reconfirmed its revenue guidance for the full year of $5.13 billion at the midpoint
- EPS (non-GAAP) guidance for the full year is $1.25 at the midpoint, beating analyst estimates by 2.4%
- Gross Margin (GAAP): 49.9%, in line with the same quarter last year
- EBITDA Margin: 11.7%, in line with the same quarter last year
- Free Cash Flow Margin: 2.9%, similar to the same quarter last year
- Organic Revenue was flat year on year
- Market Capitalization: $4.78 billion
With Wonder Bread as its premier brand, Flower Foods (NYSE:FLO) is a packaged foods company that focuses on bakery products such as breads, buns, and cakes.
Perishable FoodThe perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.
Sales GrowthFlowers Foods is larger than most consumer staples companies and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company’s annualized revenue growth rate of 5.8% over the last three years was mediocre, but to its credit, consumers bought more of its products.
This quarter, Flowers Foods missed Wall Street’s estimates and reported a rather uninspiring 0.2% year-on-year revenue decline, generating $1.22 billion in revenue. Looking ahead, Wall Street expects sales to grow 1.2% over the next 12 months, an acceleration from this quarter.
Volume Growth Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Flowers Foods’s average quarterly volume growth was a healthy 1.3% over the last two years. This is pleasing because it shows consumers are purchasing more of its products.
In Flowers Foods’s Q2 2024, sales volumes dropped 1.2% year on year. This result was a step in the right direction compared to its 6.1% year-on-year decline 12 months ago.
Key Takeaways from Flowers Foods’s Q2 Results It was encouraging to see Flowers Foods beat analysts’ EPS expectations despite a miss on organic revenue growth and total revenue. Adding to the positives was guidance--the company reaffirmed prior full year revenue and EPS guidance, showing that Flowers Foods is squarely on track. Overall, this was a solid quarter. The stock remained flat at $22.86 immediately following the results.
