Flowers Foods: A Tasty Oven Treat

Finally, the company has the resources to take market share from or purchase competitors. The company has strong cash flow, a nice dividend and an active stock buyback program -- Flowers repurchased 1.5 million shares of its own stock in the third quarter for $38 million dollars. Investors should also note some recent insider buying at the $23.00-$24.50 range.

The company recently reported third-quarter sales up more than 21% with net income up nearly 22% on a year-over-year basis. Third-quarter results were boosted by two acquisitions this year and a 3% improvement in manufacturing efficiencies. Flowers is already seeing a substantial reduction in input costs as commodity and energy prices have declined significantly since this summer. The company is giving 2009 guidance of a 12% increase in sales (acquisitions being 7% to 7.5% of the increase) and EPS of $1.33 to $1.45.

Since late summer, shares of Flowers have fallen 25% from the $32 range to just under $24. Future risks include changes in customer preferences and pricing or a decline in food-service revenues due to a decrease in restaurant sales. Flowers has weathered such downturns before and should be able to adjust the pricing and sales mix for a favorable outcome. Investors should take a 50% position in the $23 to $24 dollar range and price average down.

Know What You Own: Flowers Foods operates in the processed & packaged goods industry; investors may be interested in other stocks in this field such as Campbell Soup (CPB - commentary - Cramer's Take), PepsiCo (PEP - commentary - Cramer's Take), General Mills (GIS - commentary - Cramer's Take) and Unilever (UL - commentary - Cramer's Take).

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At the time of publication, Gear had no positions in the stocks mentioned, although positions can change at any time.

Steve Gear was director of capital markets at Stockhouse.