August 17, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of bakery products provider Flowers Foods (NYSE: FLO ) sank 10% on Wednesday after its quarterly results and full-year guidance disappointed investors.
So what: Despite posting solid second-quarter sales growth of 6%, the shares are dropping to a new four-month low on worries over what rising costs are doing to the bottom line. Food companies like Ralcorp (NYSE: RAH ) and ConAgra (NYSE: CAG ) have also been struggling with spiking ingredient costs lately, but Flowers' earnings miss -- $0.21 per share versus the analyst consensus of $0.26 per share -- was wide enough to even catch Wall Street off guard.
Now what: Expect the short-term turbulence to continue. "A prolonged and slow economic recovery, compounded by higher costs, has continued to pressure consumer buying as well as business operations," Chairman and CEO George Dees said. Of course, given Flowers' historically sound fundamentals, growth potential, and solid dividend yield, today's plunge might be providing an enticing long-term entry point.
Interested in more info on Flowers Foods? Add it to your watchlist.