Flowers Foods's (NYSE:FLO) Q4 Earnings Results: Revenue In Line With Expectations

Petr Huřťák /
2024/02/08 4:28 pm EST

Packaged bakery food company Flower Foods (NYSE:FLO) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 4.3% year on year to $1.13 billion. On the other hand, the company's full-year revenue guidance of $5.13 billion at the midpoint came in 1.5% below analysts' estimates. It made a non-GAAP profit of $0.20 per share, down from its profit of $0.23 per share in the same quarter last year.

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Flowers Foods (FLO) Q4 FY2023 Highlights:

  • Revenue: $1.13 billion vs analyst estimates of $1.13 billion (small beat)
  • EPS (non-GAAP): $0.20 vs analyst expectations of $0.21 (4.5% miss)
  • Management's revenue guidance for the upcoming financial year 2024 is $5.13 billion at the midpoint, missing analyst estimates by 1.5% and implying 0.8% growth (vs 5.9% in FY2023)
  • Management's EPS guidance for the upcoming financial year 2024 is $1.25 at the midpoint, missing analyst estimates by 3.0%
  • Free Cash Flow of $59.96 million, down 40.8% from the previous quarter
  • Gross Margin (GAAP): 47.9%, up from 46.8% in the same quarter last year
  • Sales Volumes were down 2.4% year on year
  • Market Capitalization: $4.89 billion

"Flowers' fourth quarter and full year 2023 results underscore the strength of our leading brands, as we delivered record sales despite difficult market conditions," 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.

Packaged Food

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods, prepared meals, or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences.The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

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 5.1% over the last three years was weak, but to its credit, consumers bought more of its products.

Flowers Foods Total Revenue

This quarter, Flowers Foods grew its revenue by 4.3% year on year, and its $1.13 billion in revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 2.4% over the next 12 months, a deceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Flowers Foods's free cash flow came in at $59.96 million in Q4, up 81.7% year on year. This result represents a 5.3% margin.

Flowers Foods Free Cash Flow Margin

Over the last eight quarters, Flowers Foods has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 4.3%, subpar for a consumer staples business. Flowers Foods's margin has also been flat during that time, showing the company needs to take action and improve its cash profitability.

Key Takeaways from Flowers Foods's Q4 Results

It was encouraging to see Flowers Foods slightly top analysts' gross margin expectations this quarter. That stood out as a positive in these results. On the other hand, its operating margin missed analysts' expectations and both its full-year revenue and full-year EPS guidance missed Wall Street's estimates. The company called out a challenging backdrop for operations, but one bright spot was that their 'Dave's Killer Bread' brand became a $1 billion brand, which is a major milestone in the consumer staples world. Overall, the results were mixed but could have been better with regards to the outlook. The stock is up 1.5% after reporting and currently trades at $23.75 per share.

Flowers Foods may not have had the best quarter, but does that create an opportunity to invest 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.

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