1-Star Price
INVESTOR
5-Star Price
INVESTOR
Economic Moat
INVESTOR
Capital Allocation
INVESTOR
Narrow-moat Hostess’ second-quarter results came in largely as expected, and we don’t anticipate a material change to our $23.50 fair value estimate, leaving shares fully valued. Although management increased full-year 2022 sales guidance to at least 15% growth from at least 12% growth previously, we plan to maintain our outlook, which already calls for a 15% bump in the top line.
Hostess Brands is the second-largest U.S. provider of sweet baked goods under the Hostess, Voortman, and Dolly Madison group of brands, including Twinkies, Cupcakes, Ding Dongs, Ho Hos, Donettes, and Zingers. In 2018, Hostess expanded its breakfast offerings with the purchase of Aryzta’s breakfast assets (the Cloverhill business), including a branded business and private-label deals, and in 2020 entered the cookie category via the Voortman tie-up. Although its roots stem from the 1919 launch of the Hostess Cupcake, the company filed for bankruptcy in 2012. Investors purchased the brands and restarted production in 2013, followed by a 2016 initial public offering. Most products are sold in the U.S., although third parties distribute some product to Mexico, the United Kingdom, and Canada.
