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D.A. Davidson Reiterates Underperform Rating on Flowers Foods Following Strong Q2 EPS Report

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Flowers Foods Q1 Profit Misses Estimates
Earnings Scheduled For May 28, 2015

In a report published Wednesday, D.A. Davidson analyst Tim Ramey reiterated an Underperform rating and $12.00 price target on Flowers Foods (NYSE: FLO).

In the report, D.A. Davidson noted, “Q2 operating EPS of $0.24 increased 63.7% from $0.14 last year and was a penny better than our Street-matching $0.23 estimate. Net sales of $898.2 million increased 31.8% year-over-year (y/y), compared to our expectation of $866.8 million. Sales were driven by volume increases of 21.8%, primarily due to the absence of Hostess in the market, acquisition benefits of 10.9% and partially offset by unfavorable price/mix of 0.9%...The central thesis of our UNDERPERFORM is based on two thoughts. First, the gains of the past nine months will become next year's insurmountable comps. We don't believe the sales gains and margin leverage of the past nine months are sustainable given that Hostess is back in the market as of July 15th. Management disagrees, and says they will hold onto their gains – and presumably grow with the 4Q re-introduction of Hostess bread brands. Second, a valuation of 20+ times earnings is completely incompatible with a category in secular decline, as is the packaged bread business.”

Flowers Foods closed on Tuesday at $23.26.

Latest Ratings for FLO

DateFirmActionFromTo
Apr 2015Deutsche BankMaintainsBuy
Mar 2015BMO CapitalMaintainsOutperform
Feb 2015Deutsche BankMaintainsBuy

View More Analyst Ratings for FLO
View the Latest Analyst Ratings

Posted-In: D.A. Davidson Tim RameyAnalyst Color Reiteration Analyst Ratings

 

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