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Flowers Foods Near-Term Prospects Have Wilted

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Flowers Foods Near-Term Prospects Have Wilted

D.A. Davidson sees near-term risks in Flowers Foods, Inc. (NYSE: FLO) shares that outweigh the long-term prospects. Citing soft consumer demand and increased promotional activity, the firm has initiated shares at Neutral. Aside from that, the company's EPS missed the mid-point of the guidance in the last four quarters making the sentiments depressed.

The company's organic volumes witnessed a drop in three consecutive quarters following the previous two years' 1.0 percent to flat growth. As a result, analyst Eric Gottlieb initiated the company's shares with a Neutral rating and target price of $16.00, implying modest upside potentials from the current levels.

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Aside from these, the brokerage said, "The company's independent distributor model has come under scrutiny as the definition of independent vs. company employee is being questioned.

"Nearly two dozen lawsuits have been brought by drivers, and now the company is facing a compliance review by the Department of Labor under the Fair Labor Standards Act. These events should limit the stocks potential, and be an overhang regardless of performance until an outcome can be better ascertained."

However, the analyst pointed out that Flowers Foods reached 85 percent of the population with opportunity still available, mainly due to the expansion through acquisition history.

He cited that his fiscal year 2017 EPS estimate of $0.95 is lower by $0.03 from consensus estimates on 1.3 percent sales growth. Gottlieb expects the company to deliver EPS of $0.92 for the fiscal year 2016, which would be a penny less than the consensus.

At last check, Flowers Foods was up 0.5 percent at $14.94.

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Latest Ratings for FLO

DateFirmActionFromTo
Aug 2019Initiates Coverage OnNeutral
Jul 2018DowngradesBuyHold
May 2018Initiates Coverage OnHold

View More Analyst Ratings for FLO
View the Latest Analyst Ratings

Posted-In: D.A. Davidson Eric GottliebAnalyst Color Price Target Initiation Analyst Ratings Trading Ideas

 

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