Flowers Foods, Inc. (NYSE:FLO)

CAPS Rating: 5 out of 5

The Company is a producer and marketer of packaged bakery foods for retail and foodservice customers. Its businesses are organized into two reportable segments: Flowers Bakeries and Flowers Specialty.

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TMFPencils (99.86)
Submitted December 04, 2015

Initially founded in 1919 as a lone family-owned bakery in Georgia, Flower Foods went public in 1968 and -- since that time -- has made more than 100 acquisitions and grown to become the second-largest baked foods company in the U.S. The company aims… More

fewl10 (< 20)
Submitted December 17, 2007

"A market beater (tripled) over the past five years." Pretty strong case for being bearish, don't you think? Thanks for the info, Dave. This stock is obviously overpriced. I'm a little nervous about the mere .08% decline today, but I think a P/E of… More

FLO VS S&P 500 (SPY)

Recent Community Commentary

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Recs

0
Member Avatar 2trpop (84.73) Submitted: 9/26/2016 9:32:21 AM : Outperform Start Price: $14.90 FLO Score: +11.90

FSTG experiment

Recs

0
Member Avatar AlejandroOrtiz (84.64) Submitted: 12/4/2015 2:14:06 PM : Outperform Start Price: $20.77 FLO Score: -28.68

Flowers Foods is currently the number two company in the U.S. fresh baking industry based on market share. Leading U.S. baker, whose products are available to consumers through traditional supermarkets,
foodservice distributors, convenience stores, mass merchandisers, club stores, wholesalers, casual dining and quick-serve restaurants, schools, hospitals, dollar stores, and vending machines.

Growing by acquisitions and use of technology to manufacture, distribute, and predict market changes. They pay a consistent dividend s and perform consistently over the term.

From 2003 through 2014, Flowers Foods executed its growth strategy to reach more of the U.S. population with fresh breads, buns, rolls, and snack cakes through its Direct-Store-Delivery segment. During this time frame, the company’s geographic market for its fresh bakery products and brands grew from about 38% of the U.S. population to approximately 81%. The company’s market capitalization increased from $418.9 million at the end of fiscal 2003 to $4,006.9 million at the end of fiscal 2014.

Recs

2
Member Avatar TMFPencils (99.86) Submitted: 12/3/2015 8:55:10 PM : Outperform Start Price: $7.47 FLO Score: +86.10

Initially founded in 1919 as a lone family-owned bakery in Georgia, Flower Foods went public in 1968 and -- since that time -- has made more than 100 acquisitions and grown to become the second-largest baked foods company in the U.S. The company aims to utilize technology and production/distribution efficiencies to be a low-cost producer of bakery foods, and the company has a demonstrated record of financial efficiency which has led to market-beating results for patient investors. Now, with the stock beaten down over short-term issues and trading at a P/FCF multiple of 16.7 -- about the lowest it’s been in five years -- I see this as a prime opportunity to jump in and re-up my green thumb on CAPS.

Flower Foods has a growth opportunity with organic bread, which is growing at a faster pace than the organic food category as a whole (which is growing around 10% a year or so). Premium bread loafs (including organics) only make up 10.2% of the fresh packaged breads category, a $14.7 billion category within the U.S. fresh bakery market, which is $30.9 billion in size as a whole. Flower Foods controls 14.1% market share of fresh packaged bread in the U.S., so the company is a strong player in a market that should continue to benefit from the transition to organic/natural breads which have both fewer and organic ingredients.

Organic bread household penetration is currently 30%, lower than other food staples like produce and milk. The organic bread market is already growing in the double-digits (and faster than the organic food space as a whole) and still has room to catch up to other food staples in terms of organic penetration, giving a nice long-term tailwind for this portion of Flower Foods' business. 84% of Flower Food's sales came through direct store delivery (DSD) in 2014, and the company is taking steps to expand its reach to western markets and the Pacific Northwest; it recently acquired Dave's Killer Bread (a leading brand of organic/non-GMO packaged bread in the U.S.) and Alpine Valley Bread Company. These acquisitions extend Flower Foods’ geographic reach (and production/distribution footprint) into the Pacific Northwest, in addition to boosting the company’s position in the organic bread market.

Flower Foods has a demonstrated record of maintaining capital efficiency through all of these acquisitions over the years. It has an ROE of 15.5%, ROC of 9.6%, and ROA of 7.6%. All of those numbers have drifted downward from 2009-10 (its ROE was 15.9% in 2007), however, so this will be an item to watch closely in the coming years. Another potential risk is its large net debt position of $888.3 million (with only $8.8 million in cash). However, the company’s operating cash flow production is strong and has grown over the past several years at a healthy clip: $134.3M in 2011, $216.9M in 2012, $270.5M in 2013, $314M in 2014, and $374.3M in the LTM. The company has also increased its dividend payout every year since 2002, with the dividend growing at a CAGR of 18.3% between 2004 and 2014. The company’s experienced leadership team has delivered strong results and capital allocation over the long haul, part of the reason this has typically been a market-beating stock over the long term.

This won’t be a high-flying stock, but it should generate consistent growth over the long term. Management's long-term objective is to grow sales 5%-10% annually (both through organic growth and M&A), maintain an EBITDA margin of 11%-13%, and generate EPS growth in the double digits. I’ll gladly take a company with a leadership position, proven record, and growth opportunities in its market -- especially when it is trading at a depressed valuation due to short-term worries (slightly lower guidance for 4Q results, even though the updated guidance was still in management’s prior range) that overlook the investments this experienced leadership team is making to expand and generate long-term growth for the business (and investors). I think the stock will beat the market over the next 5+ years as a result. Outperform.

Leaderboard

Find the members with the highest scoring picks in FLO.

Score Leader

Geeche

Geeche (< 20) Score: +138.69

The Score Leader is the player with the highest score across all their picks in FLO.

Top
Pick
Member Name Member
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
Index
Gain
Score Commentary
Geeche < 20 11/28/2006 5/24/2011 Outperform 3Y $5.85 +237.01% +98.32% +138.69 0 Comment
NetscribeConsGds 96.85 1/12/2007 Outperform 1Y $5.98 +229.40% +92.91% +136.49 2 Comments
chancellor1 42.37 12/8/2006 Outperform 1Y $6.00 +228.32% +94.30% +134.02 0 Comment
rothchild81 < 20 12/8/2006 Outperform 3Y $6.00 +228.32% +94.30% +134.02 0 Comment
SalemBlueGrass < 20 10/3/2006 Outperform 3M $5.84 +237.13% +106.32% +130.81 0 Comment
shirleyb123 98.08 9/28/2006 Outperform 5Y $5.93 +232.35% +104.83% +127.53 1 Comment
kflemingpe 71.13 8/25/2006 Outperform 5Y $5.84 +237.26% +112.51% +124.75 0 Comment
carroll56 < 20 8/28/2006 8/27/2013 Outperform 5Y $5.88 +235.23% +112.36% +122.87 0 Comment
rdk20070801all 74.50 8/10/2007 Outperform NS $6.34 +210.61% +88.31% +122.30 0 Comment
1badger1 < 20 8/24/2006 Outperform 3M $5.92 +232.73% +111.68% +121.05 0 Comment

Wall Street

See what the Wall Street professionals think, according to their public statements and filings.

Player Name Player
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
S&P
Gain
Score End Date Commentary
TrackJimCramer 85.09 3/28/2017 Outperform 3W $19.05 +3.43% +9.77% -6.33 0 Comment
TrackImperialCap 20.82 5/1/2014 Outperform NS $18.69 +5.39% +37.23% -31.85 0 Comment
TrackJimCramer 85.09 12/5/2013 Underperform 3W $19.73 -1.61% +31.51% +33.12 3/28/2017 @ $19.41 0 Comment
TrackSunTrustRH 90.15 5/31/2012 Outperform NS $12.24 +60.93% +96.11% -35.18 0 Comment
TrackLongbow 97.76 1/7/2011 Outperform NS $9.67 +103.70% +102.49% +1.20 0 Comment
TrackKeyBanc 96.65 5/1/2009 Outperform NS $9.73 +9.54% +50.77% -41.23 2/10/2011 @ $10.65 0 Comment
TrackJimCramer 85.09 11/20/2008 Outperform 3W $10.45 +107.89% +137.16% -29.28 12/5/2013 @ $21.72 0 Comment
TrackDADavidson 95.28 11/7/2008 Underperform NS $11.65 -15.11% -3.58% +11.53 1/12/2009 @ $9.89 0 Comment
TrackLongbow 97.76 9/3/2008 Outperform NS $11.33 -1.33% -11.97% +10.64 9/13/2010 @ $11.18 0 Comment
TrackDeutscheSec 88.45 3/25/2008 Outperform NS $8.62 +128.59% +98.57% +30.02 0 Comment
TrackJimCramer 85.09 2/8/2008 Underperform 3W $10.66 +12.85% -43.30% -56.15 11/21/2008 @ $12.03 0 Comment
TrackJohnKeeley < 20 9/30/2007 Outperform NS $7.34 +168.38% +77.37% +91.01 1 Comment
TrackSoros 88.72 9/30/2007 Outperform NS $7.34 +168.38% +77.37% +91.01 1 Comment
TrackDavenport 82.01 4/16/2007 Outperform NS $7.09 +177.74% +86.26% +91.48 0 Comment

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