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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Member Avatar AlejandroOrtiz (85.32) Submitted: 12/4/2015 2:14:06 PM : Outperform Start Price: $22.17 FLO Score: -18.40

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.

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Member Avatar TMFPencils (99.82) Submitted: 12/3/2015 8:55:10 PM : Outperform Start Price: $7.98 FLO Score: +68.67

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.

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Member Avatar starz188TEST (78.75) Submitted: 8/13/2014 10:59:40 AM : Outperform Start Price: $18.14 FLO Score: -9.27

Part of a screener test. I looked at 4-5 star stocks, with a dividend yield above 2.5%, gross margins above 25%, price 0-50% below 52-week high, with 3-year EPS of 5+, P/E < 40. These are all interesting PEGY plays for me.

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Member Avatar rknapton (24.41) Submitted: 8/26/2013 7:50:39 PM : Outperform Start Price: $20.10 FLO Score: -35.39

Long. Packaged foods company is doing well and growing nicely.

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Member Avatar bocibean (< 20) Submitted: 6/22/2013 11:21:41 PM : Outperform Start Price: $18.81 FLO Score: -23.62

always does people gotta eat

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Member Avatar vaderblue (< 20) Submitted: 6/14/2012 10:13:48 AM : Outperform Start Price: $14.16 FLO Score: -29.55

A great retirement long term investment. No doubt.
I am long here.

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Member Avatar JacquesleFou (< 20) Submitted: 1/7/2012 10:49:16 PM : Outperform Start Price: $11.25 FLO Score: -6.19

Lots of growth opportunity

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Member Avatar robertshrestha (< 20) Submitted: 10/3/2011 10:48:05 PM : Outperform Start Price: $11.23 FLO Score: -32.39

Decent growth, nice dividend yield, super-low beta reflecting stable business model, beaten down with the market. Lots to like.

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Member Avatar TMFLegendPhoenix (< 20) Submitted: 8/18/2011 8:19:43 AM : Outperform Start Price: $11.46 FLO Score: -4.55

I'm not exactly sure how it came about, but shares of Flower Foods dropped 10% in one day. Their earnings report came out yesterday and although it could have been better, it wasn't run-for-the-hills-bad. In this quarter they announced a 3-for-2 stock split and increased their annual dividend rate by 12% per share. Flowers Foods acquired Tasty Baking Company (along with Tastykake's debt) and they've had to layoff some employees due to redundant positions after the merger. Earnings per share were less than what analysts predicted due to "higher input costs across all segments," (ingredients, packaging, natural gas).
Many shareholders couldn't stand the heat so they fled the kitchen. In my opinion, the sell off was a bit overboard. Flowers' management is excellent and have shown that they can manage risks, reduce costs and make intelligent acquisitions. The company is a slow and steady grower that pays a dependable dividend.

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Member Avatar JTDIII (77.59) Submitted: 8/14/2011 1:33:07 PM : Outperform Start Price: $12.32 FLO Score: -29.09

Bread for all

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Member Avatar lcison (< 20) Submitted: 6/18/2011 11:18:32 AM : Underperform Start Price: $12.70 FLO Score: +23.72

flo

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Member Avatar mercyn (61.03) Submitted: 5/19/2011 2:46:07 PM : Outperform Start Price: $12.69 FLO Score: -15.09

Steady growth internally and through acquisitions - just completed purchase of TastyKake company out of Philadelphia. Company does not distribute nationally yet - currently products mainly in Southeast, MidAtlantic states. Lots of potential for increased distribution and new product acquisitions.

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Member Avatar scavanna (64.80) Submitted: 2/24/2011 5:36:39 AM : Outperform Start Price: $10.36 FLO Score: +9.05

sales and profit growth good balance sheet and dividend and dividend growth

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Member Avatar MizzouFanVan (82.17) Submitted: 5/13/2010 2:26:47 PM : Outperform Start Price: $10.23 FLO Score: -5.73

Stock screen - mid cap, 5 start CAPS, 5% + Ownership, P/E under 20

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Member Avatar Alpo8181 (70.06) Submitted: 4/4/2010 9:46:19 PM : Outperform Start Price: $9.44 FLO Score: +8.58

cause richdad says so :)

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Member Avatar davehemp (< 20) Submitted: 12/30/2009 11:51:43 AM : Outperform Start Price: $9.13 FLO Score: +6.16

real money in all my rated stocks

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Member Avatar AzUKHiker (37.66) Submitted: 12/8/2009 5:09:56 PM : Outperform Start Price: $8.76 FLO Score: +8.96

Good well covered yield and a value stock

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Member Avatar BoringTortoise (88.48) Submitted: 11/11/2009 4:35:52 PM : Outperform Start Price: $8.41 FLO Score: +17.18

This account tracks the less exciting stocks from my watch list - companies that are easy to understand with clean balance sheets and good track records in relatively straight-forward industries.

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Member Avatar paulpharmd (< 20) Submitted: 6/24/2009 7:00:40 PM : Outperform Start Price: $8.40 FLO Score: -22.03

This stock still has a lot of growth left in it. It is fairly valued and it is a well run company that should do well going forward. People will buy bread and buns and donuts regardless of how well the economy is doing and this company is positioning itself to be a leader. Nice dividend is icing on the cake and the P/E looks reasonable especially considering the growth prospects going forward. It is a buy!

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Member Avatar ParkerMajik (81.03) Submitted: 6/17/2009 8:57:30 PM : Outperform Start Price: $7.91 FLO Score: -7.19

good management

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