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B&G Foods (BGS) Up 14.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for B&G Foods (BGS). Shares have added about 14.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is B&G Foods due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

B&G Foods Q1 Earnings & Sales Lag Estimates, Volumes Soft

B&G Foods came up with first-quarter 2024 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. Both net sales and earnings experienced year-over-year declines.

The sales decline was due to foodservice trends and increased promotion spending. Nonetheless, management stated that the company witnessed consistent margins, moderate inflation, stabilizing volumes and reduced leverage.

Q1 Details

B&G Foods posted adjusted earnings of 18 cents per share, which missed the Zacks Consensus Estimate of 20 cents. Also, the bottom line slumped 33.3% year over year.

Net sales of $475.2 million declined 7.1% year over year mainly due to lower unit volumes stemming from the divestiture of the Green Giant U.S. shelf-stable product line (divested on Nov 8, 2023). Also, lower net pricing and effects of product mix weighed on net sales. Net sales missed the Zacks Consensus Estimate of $483 million. Base business net sales declined 4.4% to $475.3 million due to lower net pricing, an adverse product mix and lower unit volumes partly made up by positive impacts of currency headwinds.

The adjusted gross profit of $109.9 million decreased from $114.9 million in the year-ago period. The adjusted gross margin expanded 70 bps to 23.1%. The gross margin decline was backed by reduced transportation and warehousing costs, moderation of input cost inflation and reduced depreciation expenses.

SG&A expenses escalated 4% to $48.6 million due to higher general and administrative expenses, consumer marketing costs, acquisition/divestiture related cost and non-recurring expenses somewhat offset by a decline in warehousing expenses and selling costs. As a percentage of net sales, SG&A expenses climbed 1.1 percentage points to 10.2%.

Adjusted EBITDA fell 8.9% to $75 million due lower base business net sales and the impact of the Green Giant U.S. shelf-stable divestiture. The adjusted EBITDA margin contracted 30 bps to 15.8%.

Segment Details

Specialty: Net sales came in at $154.8 million, down 4.9% year over year. The decline was primarily due to lower pricing of Crisco as well as lower foodservice and industrial net sales.
Meals: Net sales of $120 million dipped 1.6% year over year, thanks lower net sales in foodservice.

Frozen & Vegetables: Net sales came in at $104.9 million, down 16.9% year over year. The downtick was due to the divestiture of Green Giant U.S. shelf-stable products, a decrease in volume, increased spending on promotional trade activities and changes in product mix within the frozen category.

Spices & Flavor Solutions: Net sales came in at $95.6 million, down 5.4% year over year due to lower net sales in food service.

Other Updates

B&G Foods ended the quarter with cash and cash equivalents of $42.5 million, net long-term debt of $2,014.2 million and total shareholders’ equity of $781.2 million.

Additionally, the company unveiled its intentions continue and speed up the restructuring of its portfolio, aiming to enhance focus, bolster margins and cash flow and optimize future value generation. As previously mentioned, the company has been assessing potential divestitures that form about 10-15% of its consolidated net sales.

Outlook

For fiscal 2024, management anticipates net sales in the band of $1.955-$1.985 billion. In fiscal 2023, net sales amounted to $2,062.3 million ($2.06 billion).

The company anticipates adjusted EBITDA in the range of around $300-$320 million, whereas it recorded $318 million in fiscal 2023.

Adjusted EPS for fiscal 2024 are envisioned to be between 75 cents and $95 cents. In fiscal 2023, the company posted adjusted EPS of 99 cents.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -17.46% due to these changes.

VGM Scores

Currently, B&G Foods has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise B&G Foods has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

B&G Foods belongs to the Zacks Food - Miscellaneous industry. Another stock from the same industry, TreeHouse Foods (THS), has gained 3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

TreeHouse reported revenues of $820.7 million in the last reported quarter, representing a year-over-year change of -8.3%. EPS of -$0.03 for the same period compares with $0.68 a year ago.

TreeHouse is expected to post earnings of $0.13 per share for the current quarter, representing a year-over-year change of -69.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -36.2%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for TreeHouse. Also, the stock has a VGM Score of C.

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