Twinkie Maker's Push Into More Upscale Snacks Helps Fuel Rally

(Bloomberg) -- Hostess Brands Inc., known for convenience-store fare like Twinkies and Ding Dongs, is making a successful foray into more upscale treats.

The company posted surprisingly strong earnings on Thursday, along with an upbeat forecast, sending the shares on their biggest rally ever. The snack maker credited the rollout of the Hostess Bakery Petites line, which has no artificial flavors or high-fructose corn syrup, for boosting the growth.

The latest results helped solidify a turnaround for an iconic American business. The company filed for bankruptcy in 2012 and was temporarily shut down, sending all of its employees packing. Hostess was reborn in a deal orchestrated by Apollo Global Management LLC and C. Dean Metropoulos & Co., but with a fraction of its former workforce.

The comeback reflects the enduring popularity of Hostess's traditional lineup, including Ho Hos and CupCakes, which have mostly evaded a shift toward healthier eating. But the company also has focused more heavily on product innovation in recent years.

In addition to Bakery Petites, it has introduced updated versions of its original products: Chocolate Cake Twinkies, White Fudge Ding Dongs and Golden CupCakes all helped lift sales last quarter, Hostess said on Thursday.

Revenue climbed 9.7 percent to $196.2 million in the fourth quarter, with Bakery Petites accounting for 3.1 percent of the increase. The new products come in resealable bags and tout the use of “real” chocolate and vanilla.

Annual Forecast

Earnings amounted to 17 cents, excluding some items, topping the 14-cent estimate. The Kansas City, Missouri-based company expects profit of 65 cents to 70 cents in the coming year -- with the midpoint of that range coming in slightly higher than the 67-cent projection.

The shares gained as much as 14 percent on the news, marking their biggest jump since they began trading in 2015. Before the surge, the stock had been down 17 percent this year.

“We were able to capitalize on the momentum provided by our robust product innovation,” Chief Executive Officer Bill Toler said in the statement. “We are optimistic about the continued growth opportunity from our product innovation, including our Hostess Bakery Petites platform.”

To contact the reporter on this story: Nick Turner in New York at nturner7@bloomberg.net.

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net.

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