Will Flowers Foods Earn More From Wonder Bread?

Tomorrow, Flowers Foods (NYSE: FLO  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk reaction to news that turns out to be exactly the wrong move.

Flowers isn't the largest company in the stock market, but it's a big player in the market for bread and other baked goods. Even though the industry may seem like a fairly staid corner of the market, Flowers has made some exciting strategic moves recently to bolster its growth. Let's take an early look at what's been happening with Flowers Foods over the past quarter and what we're likely to see in its quarterly report.

Stats on Flowers Foods

Analyst EPS Estimate

$0.42

Change From Year-Ago EPS

50%

Revenue Estimate

$1.09 billion

Change From Year-Ago Revenue

21%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

How will Flowers Foods fare this quarter?
Analysts have gotten more optimistic about Flowers Foods and its earnings prospects recently, having boosted their estimates for the first quarter by $0.04 and their full-year 2013 consensus by more than twice that amount. The stock has also done well, rising 20% since early February.

The big news this quarter came from its role in the bankruptcy proceedings for Hostess Brands. Flowers bid $360 million for its bread brands, including Wonder Bread and Butternut, as well as related baking assets. Yet Flowers expressed no interest in bidding on the company's iconic Twinkies and other snack cakes, and instead, Apollo Global Management (NYSE: APO  ) and privately held Metropoulos bid $410 million for the right to produce and sell Hostess Cup Cakes, Zingers, Twinkies, and other cake brands. Little Debbie maker McKee Foods bid on the Drake's cake line. With no other bidders emerging, Flowers was awarded court approval for the purchase in March.

Although the Hostess acquisition was high profile, Flowers has made many similar though smaller acquisitions in recent years, taking advantage of the fragmented bakery industry to pick off targets individually with attractive buyout offers. Moreover, late last year, the company bought licensing rights for the Sara Lee brand in California, after Sara Lee changed its name to Hillshire Brands (NYSE: HSH  ) and shifted its focus toward meat products. The move helped Sara Lee reap more money from its brand while giving Flowers more market share in the important California market.

The key for Flowers going forward will be to avoid the high food costs that have plagued some fellow bakers. Restaurant-bakery operator Panera Bread (NASDAQ: PNRA  ) managed to avoid some of the impact of high input costs by producing its own dough, but Flowers will need to secure equally stable supplies or else hope for more favorable weather conditions to prevail this season.

In Flowers' earnings report, watch for the company to show more about what the impact of gaining the Wonder Bread brand will have on sales and profits. Right now is an exciting time for Flowers, and what it does with this opportunity will define its future for years to come.

Flowers has an exciting opportunity, but in the case of Panera Bread, there's also reason to believe that the best is yet to come. The stock has been on an absolute tear over the past five years, and you're invited to find out why -- and what else there is to look forward to -- in The Motley Fool's brand-new premium report on Panera. Included are key areas that investors must watch, as well as opportunities and threats facing the company both today and in the long term. Don't miss out on this invaluable investor's resource -- simply click here now to claim your copy today.

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