(By Balaseshan) Flowers Foods Inc. (NYSE:FLO), a producer and marketers of bakery products, reported a marginally 0.6% increase in quarterly earnings on continued growth of its Nature's Own and Tastykake brands as well as its Tasty acquisition. Earnings came in line with Street's forecast, while revenue missed consensus.
Profit for the second quarter rose 0.6% to $28.38 million, while earnings per share (EPS) remained flat with last year at $0.21. Adjusted EPS declined to $0.22 from $0.23.
Sales increased 6.1% to $681.56 million, on favorable net price/mix of 2.3%, contributions from the Tasty acquisition (acquired May 20, 2011) of 4.5%, partially offset by volume declines of 0.7%.
Analysts, on average, polled by Thomson Reuters had expected a profit of $0.22 per share on revenue of $703.80 million for the second quarter.
Direct store delivery (DSD) sales increased 7.6% to $564.41 million, reflecting positive net price/mix of 1.5%, contribution from the Tasty acquisition (until cycled) of 5.5% and volume increases of 0.6%.
Sales through warehouse delivery decreased 0.7% to $117.15 million, reflecting volume decreases of 4.5%, partially offset by positive net price/mix of 3.8%.
Gross margin decreased 50 basis points to 46.3% from 46.8%, due primarily to increased ingredient and packaging costs as a percent of sales. The increase in ingredient costs was primarily attributable to flour and sweeteners.
Looking ahead into the fiscal 2012, the company now expects EPS to grow 3.5% to 8.0% excluding one-time costs but including Lepage Bakeries acquisition, over the 2011 adjusted earnings per share of $0.96. The company anticipates 2012 sales including Lepage acquisition to increase 7.0% to 9.0% over 2011 with Lepage accounting for about 2.5% of the increase.
Lepage is expected to be accretive about $0.02 to $0.04 in the second half, net of financing costs. Excluding Lepage, Flowers' EPS are now expected to be flat to slightly up. Street analysts predict EPS to increase 7.30% on revenue growth of 10.50% for the fiscal 2012.
Our guidance takes into consideration the heightened marketplace competitiveness and overall challenging business environment. Capital expenditures for 2012 are expected to be $75.0 million to $85.0 million.
"The opportunities presented by the Lepage acquisition, last year's Tasty Baking acquisition, and further industry consolidation, strengthen my confidence in our team's ability to achieve our long-term growth objectives for 5% to 10% annual sales growth, double-digit earnings growth, and reaching 75% of the U.S. population with our direct-store-delivery segment by 2016," said George Deese, Flowers Foods' chief executive.
FLO closed Monday's regular session down 0.76% at $20.88. The stock has been trading between $17.79 and $24.20 for the past 52 weeks.