Deutsche Bank: Flowers Foods Is 'Blossoming' Again

• Flowers Foods, Inc FLOW shares have been on an uptrend since the beginning of 2015 and are trading close to their 52-week high of $24.49.
• Deutsche Bank’s Eric Katzman reinstated coverage of the company with a Buy rating and a price target of $27.
• An improving fundamental backdrop and recent logical acquisitions skew the risk-reward positive, Katzman stated.

Analyst Eric Katzman mentioned that although legal issues remain an area of concern, investors should recognize “an improving fundamental backdrop.” More rational category dynamics, share gains, two logical acquisitions by Flowers Foods and improved manufacturing efficiency levels skew the risk-reward positive.

Flowers Foods reported its 2Q15 operating EPS at $0.25, excluding a one-time item of $0.01, ahead of expectations. The company’s Q2 sales increased 1.8 percent, slightly short of the Deutsche Bank estimate of a 2.3 percent rise. The company affirmed its 2015 guidance at sales of $3.8 billion and EPS of $0.96-$1.01.

While the 2014 fundamentals were hampered by Hostess bread M&A integration and other issues, the company has shown an improvement in 2015. Katzman added that the recent acquisitions are likely to create value for the company.

The EPS estimates for 2015 and 2016 have been raised from $0.96 to $1.03 and from $1.06 to $1.16, respectively.