Flowers Foods (NYSE:FLO) Reports Q1 In Line With Expectations

Radek Strnad /
2024/05/16 4:18 pm EDT

Packaged bakery food company Flower Foods (NYSE:FLO) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 2.8% year on year to $1.58 billion. On the other hand, the company's full-year revenue guidance of $5.13 billion at the midpoint came in slightly below analysts' estimates. Its non-GAAP profit of $0.38 per share was flat year on year.

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Flowers Foods (FLO) Q1 CY2024 Highlights:

  • Revenue: $1.58 billion vs analyst estimates of $1.58 billion (small miss)
  • Adjusted EBITDA: $159.4 million vs analyst estimates of $168.2 million (5.2% miss)
  • EPS (non-GAAP): $0.38 vs analyst expectations of $0.41 (6.2% miss)
  • The company reconfirmed its revenue guidance for the full year of $5.13 billion at the midpoint
  • The company reconfirmed its EPS (non-GAAP) guidance for the full year of $1.25 at the midpoint (slightly above expectations)
  • Gross Margin (GAAP): 49.4%, up from 47.8% in the same quarter last year
  • Free Cash Flow of $71.82 million, up 19.7% from the previous quarter
  • Sales Volumes were down 0.8% year on year
  • Market Capitalization: $5.39 billion

"Our solid first quarter results highlight the increasing effectiveness of our portfolio strategy and investments in marketing and innovation," said Ryals McMullian, chairman and CEO of Flowers Foods.

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 Food

The 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 Growth

Flowers 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 5.7% over the last three years was mediocre for a consumer staples business.

Flowers Foods Total Revenue

This quarter, Flowers Foods's revenue grew 2.8% year on year to $1.58 billion, falling short of Wall Street's estimates. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.

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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 3.3% over the last two years. This is pleasing because it shows consumers are purchasing more of its products.

Flowers Foods Year-On-Year Volume Growth

In Flowers Foods's Q1 2024, year on year sales volumes were flat. This result was a well-appreciated turnaround from the 7.3% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.

Key Takeaways from Flowers Foods's Q1 Results

Revenue and adjusted EBITDA both missed. While the company reaffirmed full year revenue guidance, it is below expectations at the midpoint. Offsetting this bad news is the fact that the company reaffirmed full year EPS guidance as well, and that came in slightly above Wall Street estimates. Overall, the results were mixed but could have been better. The stock is flat after reporting and currently trades at $25.7 per share.

So should you invest in Flowers Foods right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.