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In a challenging market environment, Flowers Foods , Inc. (NYSE:FLO) stock has touched a 52-week low, dipping to $17.95. According to InvestingPro data, the company maintains strong fundamentals with a healthy 5.24% dividend yield and has raised its dividend for 11 consecutive years. The company, known for its bakery products, has faced headwinds that have led to a significant 1-year change, with the stock price declining by 22.2%. While investors closely monitor the company's performance amid economic pressures, InvestingPro analysis suggests the stock is currently undervalued, with liquid assets exceeding short-term obligations and a P/E ratio of 15.5x. The 52-week low serves as a critical point of interest for both current shareholders and potential investors who are assessing the company's valuation and future prospects in a volatile market. Despite recent challenges, InvestingPro's comprehensive analysis reveals multiple positive indicators, with analysts maintaining profitability forecasts for the upcoming year.
In other recent news, Flowers Foods has made significant strides in expanding its business through the acquisition of Simple Mills for $795 million. This acquisition, expected to finalize in the first quarter of 2025, is entirely debt-financed, leading to a Fitch Ratings downgrade of Flowers Foods to 'BBB-' from 'BBB'. The acquisition is anticipated to increase Flowers Foods' revenue by about $240 million annually, contributing to a projected pro forma revenue exceeding $5.3 billion in 2024. Moody’s Ratings has also downgraded Flowers Foods’ long-term issuer and senior unsecured debt ratings from Baa2 to Baa3, citing increased leverage following the acquisition.
To finance this acquisition, Flowers Foods has issued 5.750% Senior Notes due 2035 and 6.200% Senior Notes due 2055. The company also initiated a new five-year $500 million revolving credit facility. S&P Global has revised Flowers Foods' outlook from stable to negative, highlighting the increased leverage post-acquisition, with a warning of a potential downgrade if leverage does not improve within 24 months. DA Davidson has adjusted its price target for Flowers Foods shares to $21 from $24, maintaining a Neutral rating due to concerns about the packaged bakery sector.
Despite these challenges, Flowers Foods is expected to see improvements in free operating cash flow, projected to rise from $280 million in 2024 to $300 million in 2025, and further to $360 million in 2026. The company plans to leverage the Simple Mills acquisition to diversify its portfolio with premium, differentiated categories, though execution risks remain due to competition in the cookie and cracker markets.
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