Packaged bakery food company Flower Foods (NYSE:FLO) met Wall Street’s revenue expectations in Q3 CY2024, but sales were flat year on year at $1.19 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $5.13 billion at the midpoint. Its non-GAAP profit of $0.33 per share was 12.3% above analysts’ consensus estimates.

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"Strong performance by our leading brands and successful execution of our cost initiatives and portfolio strategy drove better-than-expected earnings in the third quarter," said Ryals McMullian, chairman and CEO of Flowers Foods.

Company Overview

With Wonder Bread as its premier brand, Flower Foods (NYSE:FLO) is a packaged foods company that focuses on bakery products such as breads, buns, and cakes.

Perishable Food

The perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.

Sales Growth

A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

Flowers Foods carries some recognizable products but is a mid-sized consumer staples company. Its size could bring disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale.

As you can see below, Flowers Foods’s 5.4% annualized revenue growth over the last three years was tepid as consumers bought less of its products. We’ll explore what this means in the "Volume Growth" section.

This quarter, Flowers Foods’s $1.19 billion of revenue was flat year on year and in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 1.4% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and illustrates the market thinks its products will see some demand headwinds.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Flowers Foods’s average quarterly sales volumes have shrunk by 1.2% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.

In Flowers Foods’s Q3 2024, sales volumes dropped 2.4% year on year. This result was a reversal from the 4.1% year-on-year increase it posted 12 months ago. A one quarter hiccup shouldn’t deter you from investing in a business. We’ll be monitoring the company to see how things progress.

Key Takeaways from Flowers Foods’s Q3 Results

We liked that Flowers Foods beat analysts’ EBITDA and EPS expectations this quarter despite in line revenue. It was also a big positive that full year EPS guidance was raised. On the other hand, its organic revenue missed. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The stock remained flat at $22.08 immediately after reporting.

So do we think Flowers Foods is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.