Analyst Mitchell Pinheiro says Tasty Baking's announcement that it will lose money in the third quarter is reflective of the investment spending that's needed to grow the Tastykake business. He says the baked-goods manufacturer needs to grow its route system, but he says this step will be "painful" for the company's near-term and intermediate-term earnings.
Longer-term, Pinheiro believes this is the right move. He says the expense associated with growing the route system is one of the primary drivers of baking industry consolidation. Pinheiro cut the 19 cents 2003 earnings per share estimate to a 20 cents loss, and cut the 40 cents 2004 earnings per share estimate to 15 cents, to reflect expansion costs, and a higher level of marketing and promotional spending.