Despite losing nearly half of its value three years ago and dropping significantly below its long-term average, the Flowers Foods, Inc. (NYSE:FLO) share price has risen back to above-average levels.
While still recovering from the major correction in late 2015 and 2016, the Flowers Foods share price has been on a steep recovery trend over the past three years. The company supplemented this share price recovery with a continuous stream of rising dividend income distributions to reward its shareholders with robust total returns over the trailing 12 months, as well as the last three years.
On August 8, 2019, Flowers Foods reported financial results for the second quarter of 2019, which ended on July 13, 2019. Sales increased 3.7% year-over-year to nearly $1 billion for the quarter. The additional sales from the acquisition of Canyon Bakehouse LLC, accounted for approximately half of that total growth, or 1.9%. The other half of the growth came from the sales expansion of Dave’s Killer Bread brand, additional new products and a slight average price increase due to the product mix shift and despite a 0.1% decline in total volume.
Earnings increased 3.2% versus the same period last year to $106 million, or $0.25 per diluted share, which was 4% higher than previous year. The adjusted earnings per share (EPS) were also $0.25, which was the same as last year and level with analysts’ earnings expectations.
Flowers Foods generated more than $208 million cash from operations during the period. The company used $47.4 million for capital expenditures, distributed nearly $80 million as dividends and paid down nearly $87 million of its debt.
In light of its performance during the first half of the year, Flowers Foods reiterated its outlook for full-year 2019. The company is on track to meet its original forecast and grow its sales between 2% and 4%, with half of the growth originating from the Canyon family of products. Additionally, the company restated its adjusted earnings target between $0.94 and $0.99 per diluted share.
The company also shared some of its plans and initiatives for the expanded time horizon beyond 2019. The company will increase focus on its offering of organic bread to align better the overall market demand shift. While the overall packaged bread market had declined 6% over the last three years, the organic packaged bread market has nearly doubled in the same period.
Additionally, Flowers Foods has an annual sales growth rate target of 3% to 4% for the next few years and plans to realize a 250 basis-point improvement of its earnings before interest, taxes, depreciation and amortization margin expansion by fiscal 2021. Furthermore, even with the anticipated share price growth, which will lower the dividend yield, the company should easily maintain its yield level well above the 2%+ long-term target.
Riding a pullback that began in May 2018, the share price entered the trailing 12 months on a downtrend. Assisted by the downward pressure from the overall market correction in the fourth quarter of the year, the Flowers Foods share price declined almost 12% before reaching its 52-week low of $17.96 on December 24, 2018.
However, as soon as the overall markets lessened the downward pressure and began rising in late December 2018, the Flowers Foods stock embarked on its current uptrend as well. By mid-February 2019, the share price recovered all its losses since the onset of the trailing 12-month period in late-August 2018 and continued its ascent. After rising steadily for almost another six months, the share price reached its 52-week high of $24.24 on August 7, 2019, for a total gain of 26% above the Christmas Eve low.
Following its 52-week high in early August, the share price pulled back to close at the end of trading on August 21, 2019, at $22.73. While 6% lower than the early August peak, the August 21 closing price was 11.6% higher than it was one year earlier, as well as 26.6% higher than the 52-week low from the end of December 2018. While the 2016 pullback limited the five-year share price gain to just 16%, the share price expanded more than 52% over the last three years.
In addition to the double-digit-percentage share price advancement, Flowers Foods shareholders also enjoyed robust total returns because the company continued to deliver dividend income payouts at above-average yields. The combined total return on shareholders’ investment was 15.4% over the trailing 12 months. Because the share price suffered the 45% drop in late 2015 and the first half of 2016, the total return was limited to slightly more than 34% over the last five years. However, as the share price embarked on a fast recovery trajectory, the total returns increased to high levels again. Flowers Foods delivered a total return of more than 65% to its shareholders over the last three years.
Flowers Foods, Inc. (NYSE: FLO)
Headquartered in Thomasville, Georgia, and founded in 1919 as Flowers Industries, the company changed its name to Flowers Foods, Inc. in 2001. The company produces and markets bakery products in the United States through two business segments, Direct Store Delivery (DSD) and Warehouse Delivery. The DSD segment produces and markets fresh breads, buns, rolls, tortillas and snack cakes. This segment offers its products primarily under the Nature’s Own, Wonder, Cobblestone Bread Company, Tastykake and Dave’s Killer Bread brand names. The company operates 39 bakeries in this segment and sells its products through a network of independent distributors to retail and foodservice customers. The Warehouse Delivery segment produces snack cakes, frozen breads and rolls for national retail, foodservice and vending customers through a network of warehouse channels. This segment markets its products under the Mrs. Freshley’s, Alpine Valley Bread and European Bakers brand names. Additionally, this segment also sells products under franchised and licensed trademarks, such as Sunbeam, Bunny and Sara Lee.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.