Flowers Foods (FLO)

[Caversham]

Is anyone a current shareholder or planning on starting a position? It appears to be one of the few consumer staples that are fairly valued today after its selloff last week.

FLO is the #2 breadmaker in the US and they own a lot of recognizable brands.  Their financials are reasonable, although revenue and EPS growth has slowed. Their debt has also increased over the past couple of years, primarily due to acquisitions.

It appears most of their growth comes from acquisitions.  I think their recent entry into the organic bread space through acquisitions of Dave's Killer Bread and Alpine is a smart move.

FLO currently yields 3.7% and the 10 year dividend growth rate is 14%.  The dividend seems well covered by FCF.

My primary concern is the slowdown of revenue and EPS growth over the last couple of years.  I still need to read the last couple of earnings call transcripts on SA to see if there are any insights on if this slowdown is a temporary setback or is indicative of longer term issues.

[EricL]

I own FLO and have been happy with the company. I think it is having a bit of trouble digesting the last few acquisitions but long-term I think it is a good company. I still need to read the transcript from the recent conference call to see what went wrong though.

[Caversham]

I have reviewed the earnings call and am not particularly concerned.

It looks like the quarter was weak across the board for most food retailers, and FLO did not lose market share. They mentioned in the call that Q1 sales already appear to be back on track.

FLO had a couple of issues integrating their recent acquisitions and some issues bringing online and converting some of their bakeries. I think these issues will resolve themselves moving forward.

There was also concern about the independent distributor lawsuit, however I'm not concerned about this.

I think the slowdown in revenue and EPS growth is temporary. I believe growth will resume when the recent acquisitions are fully integrated and as their expansion into the Midwest and West continues.

I believe shares are fairly (maybe even slightly undervalued). I plan to open a position and begin accumulating shares.

[EricL]

Thanks for the info Caversham.

[Dividendsrule]

Yep...Honestly I'm not super up-to-date on the company, but I'm familiar with the basic idea...I have had my eye on it for the past 5 years. When it was down 20% in one day, I snagged some, and bought more the next day. Forward earnings are around a buck, dividend is .58, for me that is just fine on a 3.6-3.7% yield like that. I know they bought some of the hostess bread brands a while back...

I was gluten free for a bit, I still try to be but it gets boring. Humanity has been eating bread for thousands of years.