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How Flowers Foods Fared in 4Q17

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Part 2
How Flowers Foods Fared in 4Q17 PART 2 OF 6

A Look at Flowers Foods’ 4Q17 Earnings Performance

Adjusted EPS tops estimates

Flowers Foods (FLO) reported 4Q17 results on February 7, 2018. The company’s 4Q17 adjusted EPS (earnings per share) of $0.17 beat the analysts’ estimate of $0.15. The bottom line benefitted from lower tax rates as well as cost savings. But these favorable factors were offset by higher production costs.

A Look at Flowers Foods’ 4Q17 Earnings Performance

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The company remains focused on improving the efficiency of its entire operations to address cost inflation. The company expects to see a $40 million input cost inflation in 2018. To combat this rise in input costs, the company through its Project Centennial is estimating gross savings of $38 million to $48 million in fiscal 2018. Flower Foods expects to reinvest a part of its savings to drive brand marketing.

On a reported basis, earnings were $0.37 per share in 4Q17 compared with $0.06 per share in 4Q16. In 4Q17, the company recorded a one-time benefit of $0.23 per share due to tax reforms. The company expects to report adjusted EPS (inclusive of tax benefit in the range of $0.15 to $0.17) in the range of $1.04 to $1.16 in fiscal 2018, reflecting an increase of 16.9% to 30.3% on a YoY basis.

Peer performance

Analysts project Campbell Soup’s (CPB) adjusted EPS to be down 9.9% to $0.82 in fiscal 2Q18, marred by tepid sales and higher costs (transportation, logistics, and carrot costs due to lower yield). Campbell Soup has established strong cost-cutting measures that could help it save $450 million by 2020.

For Conagra (CAG), analysts project adjusted EPS to be $0.50 in fiscal 3Q18, up 4.2% YoY. Higher sales as well as aggressive cost control and an extensive share repurchase plan are likely to drive bottom-line results. However, cost inflation and investments made in brand marketing continue to be concerns.

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