KeyBanc Capital Markets Downgrades Flower Foods To Hold (FLO)

KeyBanc Capital Markets downgraded Flower Foods FLO to Hold from Buy in a research report published today. In the report, KeyBanc Capital Markets states, "We were expecting higher wheat costs to force bread producers to reduce the high levels of promotional activity in the category, which in turn would accelerate FLO's sales and EPS growth; sales were down 1% in 2010 compared to a five year CAGR of 9%, while EPS grew 7% in 2010 compared to a five year CAGR of 19%. However, despite the increase in wheat prices in the 4Q (spot prices up 35%) some of FLO's competitors did not follow its price increases. Consequently, FLO lost market share and its volumes and earnings came in well below expectations. As a result of the disappointing 4Q results and lack of meaningful improvement in bread prices (bread CPI up only 1% in December) to date, we are less certain than before that promotional activity will subside to a substantial extent in the near term." Shares of Flower Foods were at $24.33 in pre-market trading at the time of posting, down 1.22% from Thursday's market close.